Cost of luxuries rises twice as fast as everyday goods

THE cost of luxury is rising at twice the rate of inflation amid increases in school fees and the price of Savile Row suits.

Britons maintaining a luxury lifestyle are seeing prices rise by 5.5 per cent a year, more than double the official 2.4 per cent annual inflation rate used by the Government, which is based on the price of everyday grocer- ies, household bills, fuel and other cost of living expenses.

The Luxury Price Index from Coutts, the private bank, shows the rich will have to dip deeper into their reserves to afford the finer things in life.

The index is compiled by looking at the basket of 142 items the Government uses to work out the consumer price index and then swapping them for high-end alternatives.

For instance, where the government’s basket includes high street retailers for clothes or gadgets, the luxury index looks at the annual price rise at Savile Row tailors or for highend mobile phones.

Footwear and clothing for those with more expensive tastes rose by six per cent in the past 12 months and mobile phones and other gadgets went up by 18.3 per cent, according to Coutts. Private school fees have increased by 6.4 per cent and high-end transport costs by 6.5 per cent.

Sven Balzer, head of investment strategy at Coutts, said wealthier Britons needed to invest more to make sure their money continued to increase at a faster rate than luxury inflation.

He said: “Inflation in luxury goods is still much higher than the average return on cash, and is likely to remain so for the foreseeable future.

“While cash has its place in a portfolio – it has low risk and is usually easy to access in the short-term – anyone looking to maintain the spending power of their wealth in the long term should consider a diversified investment portfolio alongside cash holdings.”