Starbucks’ Successful British Invasion

Starbucks is pretty much synonymous with Seattle, and the company’s rapid spread over the last two decades has transformed thousands of street corners across the U.S. into branch locations and franchises. However, recent news could point to an even larger international footprint for Starbucks.

The BBC reported that Starbucks’ U.K. profits have jumped to an all-time high of £34.2 million ($51 million) in the year ending Sept. 27. Compared to 2014, when Starbucks’ pre-tax profits in Britain failed to top £2 million, the figure represents a stunning turnaround for the coffee shop chain.

“Thanks to the commitment and hard work of our partners (employees), Starbucks has delivered its largest ever after-tax profit since opening in the U.K. in 1998,” Kris Engskov, president of Starbucks Europe, Middle East and Africa, said in a statement to the BBC. “Before and after-tax profits are both up by more than £30m as we have invested in the store experience while managing our costs.”

What Engskov didn’t mention, however, was the amount of taxes taken out of Starbucks’ U.K. profits. The Guardian explained that, due to last year’s PR snafu when news broke that the chain paid a substantially lower tax rate that allowed excess profits, Starbucks streamlined the reporting of its finances to the appropriate authorities and ended up paying slightly less than its combined U.K. tax payments (£8.6 million) since opening its first shop on the island in 1998. Starbucks’ 2015 tax rate comes in at 24 percent – 4 points higher than the U.K.’s national 20 percent average for corporations operating on British soil.

However, some experts, like U.K. accountant Richard Murphy, said that Starbucks has to work harder on its finances to win back the public trust of British coffee drinkers.

“If companies like Starbucks are going to claim to pay fair tax they have to realize it’s a lot more complicated than calculating a percentage tax rate,” Murphy told The Guardian. “It’s showing that the profit is right that is now the critical issue and Starbucks are nowhere near doing that.”


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