TheChek News Flow

Luxury discounting on the rise as years of price increases bite

About 35% to 40% of designer goods were sold at steep markdowns this year, analysts say

Up to 40 per cent of luxury goods were sold at a discount in 2025, hitting the sector’s profits as shoppers question the value of designer products after years of price rises.

Rising levels of discounting have pushed industry margins to a 15-year low, excluding the Covid-19 pandemic, in a slow market for designer products from shoes to handbags.

About 35 to 40 per cent of luxury goods were sold at knockdown prices last year, according to consultancy Bain and Altagamma, the Italian luxury goods industry association, a rise of at least five percentage points from a decade ago.

More consumers are turning to outlet stores rather than paying full price for branded goods in boutiques, they said. While some reductions also take place in designers’ own boutiques, that is less usual for top labels.

“When consumers step back from paying full price, it is less a sign of frugality and more a clear message that the price-to-value equation in luxury has drifted out of balance,” said Claudia D’Arpizio, Bain’s global head of luxury.

Luxury groups pushed through sharp price rises in the post-pandemic sales boom. Prices on many products are between 1.5 and 1.7 times higher than they were in 2019, D’Arpizio noted, while luxury brands’ pipeline of new hit products has dwindled.

The degree of discounting has become a challenge for an industry where top brands work to reduce their exposure to wholesale and discounted sales channels, in order to better control how their products are priced and presented.  

“My customers are turning to contemporary brands or emerging designers, where the fashion content is high but the price point is lower than the big luxury names. So that’s where I’m putting more budget,” said a buyer at a big European department store. 

The new crop of designers who have debuted in recent months at brands from Gucci to Chanel and Dior should help bring “new energy” to high-end design houses, the person added.

“The early signs in terms of creativity are promising [but] we’ll have to see if it’s enough to justify the cost,” the person said, adding that the new arrivals still needed time to settle in before being able to build momentum behind so-called hero products.  

Steep price increases during the Covid sales boom helped turbocharge the profitability of luxury brands, but margins on personal goods have fallen back to levels last seen in 2009, according to Bain. Average operating profit margins in the sector peaked at 23 per cent in 2012, and were 21 per cent in 2021, but are expected to be about 15 to 16 per cent in 2025.

Higher costs and the need to keep investing in marketing have added to the strain, even as the market for luxury goods has slowed.

Gucci and Saint Laurent owner Kering, which has been one of the worst performers in recent years, is undertaking a portfolio review as new chief executive Luca de Meo tries to cut costs and scale back the group’s retail network.

Sector leader LVMH has reined in spending on marketing blitzes, reduced travel budgets and closed underperforming retail locations, notably in China. The group has, however, pushed ahead with mega-projects such as a giant Shanghai store in the shape of a cruise ship, which opened last year.

Chanel reduced marketing spend and slowed hiring in China in 2025, according to people with knowledge of the situation. 

Chanel declined to comment.

LVMH said it had “controlled non-priority costs and continued to invest in brand desirability, for example with projects that surprise people just like The Louis did in Shanghai”.

There are early indications that the Chinese market has stabilised after a difficult two years. Sales of jewellery and experiences — such as travel and dining — have stayed relatively strong. 

“After the shopping spree era, experiences and emotions have become the true engine of luxury growth,” said D’Arpizio.

Are you sure you want to leave the UK to avoid inheritance tax?

Advisers say increasing numbers of clients are taking advantage of residency rules

Are you thinking about leaving the UK to avoid inheritance tax? Wealth advisers to the country’s richest people say that it’s all anyone wanted to talk about this year — and, for a surprising number, the answer was “yes”. 

I say surprising, because it makes you wonder if these people have actually considered what it would entail. These are people who want their heirs to inherit as much money as possible — but to do that they are willing to see less of them while they’re still alive. So the question really becomes, which do you hate more: paying taxes or spending time with the grandkids?

These people aren’t non-doms, advisers say — who often live a peripatetic lifestyle anyway. They are UK citizens taking advantage of the change in the non-dom regime in April, acting on what is perhaps an unintended consequence of the new rules. By ditching domicile as a measure of where you should pay inheritance tax and replacing it with residency, all a UK resident needs to do now to avoid IHT is live in another country for 10 years. After this time, their overseas assets fall out of UK inheritance tax (though not their UK assets — those opting to keep the £5mn Mayfair pad will still have to pay IHT on that).

This sounds bonkers. But Nimesh Shah, head of tax adviser Blick Rothenberg, says about 10 per cent of his firm’s clients have already left, while another 10-15 per cent are thinking of doing so. Of course, only those with significant wealth — upwards of £15m, one adviser reckons — are considering leaving.

Not only can you escape inheritance tax by becoming non-resident: if you then move back to the UK, your overseas assets don’t fall back within the IHT system for another 10 years. This means that people could attempt to time their death by, essentially, planning to die within a decade of returning to the UK. 

The mind boggles at the practicalities of such a decision. Say you left in your mid-60s and returned in your mid-70s. Your life expectancy at 75, according to the ONS website, is another 12 years for a man and 14 for a woman. You have to get to 80 before your life expectancy is less than a decade for a man — and 82 for a woman. And that’s not even taking into account the fact that rich people live longer than average, making it even riskier to time death. 

Some try to mitigate the downsides by selecting a closer option. Jersey and Guernsey are particularly popular, advisers say, bringing the advantage of being able to swoop in for a day trip to see the grandchildren in a play without using up a precious overnight stay in the UK for tax purposes. Yet it impacts families in other ways. Often — “more often than you’d think”, says one adviser — the husband will leave the country, while the wife and kids stay. 

Not everyone is game. One adviser tells me of a client who was excited about the idea of leaving the country to save on tax. A few weeks later he returned, sheepish, and said that it was no longer on the table: they had just had a grandchild and his wife had said she wasn’t coming. 

And some people are already coming back to the UK because things didn’t work out. Reasons given: Portugal was boring; they couldn’t get their kids into school in Geneva; the locals in Milan didn’t like them; and they paid £10mn for an apartment in Monaco with a sea view, then someone built an apartment in front of them. 

Alan Barral, a financial adviser at Quilter Cheviot, says that most wealthy clients ultimately decide that the inconvenience to their life outweighs the positives. 

For now, the number of UK citizens leaving for tax purposes isn’t an exodus due to these personal considerations. But for the younger generation it could be a different story. 

One adviser says that for many entrepreneurs in their 30s and 40s, “the spectre of their worldwide assets being subject to UK IHT is too much for them to bear”. The UK’s high flat rate of 40 per cent IHT is seen as particularly off-putting for those with global options. While it may seem a premature topic for people so young to worry about, the question of leaving the country to avoid IHT after they sell their business is now firmly part of the discussion, advisers say.

If they leave and don’t come back, their children may not end up in the UK anyway, removing what is a current barrier to exit for many.

And those balking at the idea now might come round to it in a few years if it becomes normalised in their circles. Such people are likely to feel strongly about the notion of fair taxes: while inheritance tax is notoriously unpopular among those liable for it, squeezes via other taxes on wealthier people are making some decide that if there is an exit route they will take it.

One adviser says their clients would have been willing to pay up to half a million or even more to maintain non-dom status, as opposed to the relatively small £90,000 under the old regime. Compromises like these — pitting political points against revenue-raising measures — should be considered if the government wants to keep more mobile multimillionaires in the country. For now, they just have to hope that their grandchildren are sufficiently entertaining.

Europe’s top central banker earns almost four times more than Fed chair Jay Powell, FT analysis shows

European Central Bank president Christine Lagarde’s full pay is more than 50 per cent higher than her disclosed salary, according to a Financial Times analysis. 

The head of Europe’s monetary authority earned a total of about €726,000 in 2024, according to the FT’s calculations, some 56 per cent higher than the “basic” salary of €466,000 disclosed by the ECB in its annual report.

This means Lagarde earns nearly four times more than the chair of the US Federal Reserve, Jay Powell, whose salary is set by federal US law and is currently capped at $203,000 (€172,720).

While Lagarde’s full pay is modest compared to the chief executives of large EU companies, the analysis exposes how limited pay disclosure remains at the ECB.

The central bank is not subject to the same strict rules as listed companies in the bloc, which dictate they must give a “full and reliable picture of the remuneration” of each of their directors.

Fabio De Masi, MEP and chair of Germany’s populist-left party BSW, said it was “scandalous” that Deutsche Bank chief executive Christian Sewing “provides the public with more detailed information about his pay than Madame Lagarde does”. Sewing earned €9.8mn in 2024.

De Masi urged the ECB to adopt a similar standard to the European pay disclosure laws for listed companies. “The president of the ECB and highest-paid EU official should represent the gold standard of accountability,” he said.

Lagarde’s basic salary alone makes her the best-paid official in the EU. European Commission president Ursula von der Leyen’s annual basic pay is 21 per cent lower.

On top of her basic salary, Lagarde receives an estimated €135,000 in fringe benefits for housing and other matters, according to the FT’s analysis. The ECB’s annual report does not offer individual disclosure of executive board members’ fringe benefits.

Lagarde also earns an estimated €125,000 for her position as one of the 18 members of the board of directors of the Bank for International Settlements — known as the “bank for central banks”. The ECB annual report does not reference Lagarde’s BIS salary. The BIS itself only discloses aggregate pay for all its board members. Powell was not paid for his role on the BIS board due to US law that bans officials from receiving a salary from non-US entities, the Fed told the FT.

Due to a lack of detailed and consolidated data, the FT’s calculations are based on the annual reports of both the ECB and BIS, as well as a technical document spelling out the “terms and conditions” of top ECB officials’ pay. The estimate does not include the ECB’s contributions to Lagarde’s pension and the cost of her health plan and insurances due to a lack of available data.

The FT shared the methodology, assumptions and results of its calculations in detail with the ECB. It declined to comment on the analysis but said in a statement that the president’s salary was set by a remuneration committee and its governing council “at the start of the ECB”, which was founded in 1998. “The only change to salary since then, for all presidents, has been the annual salary adjustment that applies to all ECB staff,” it said.

The central bank said its disclosure “is in line with many other international public institutions”, adding that it had “increased the level of transparency over time”.

The BIS declined to comment.

Academic research stresses that the personal financial independence of central bankers is a crucial part of the wider autonomy required to successfully fight inflation.

A 2004 IMF survey on central bank governance concluded that a senior central banker should be paid at levels comparable to the private sector, and protected from pay cuts during their tenure “to avoid undue influence”.

The level of Lagarde’s total pay is “what I would have expected,” said Guido Ferrarini, emeritus professor of law at Genoa University in Italy and one of Europe’s leading remuneration experts, pointing to the “level of responsibility at institutions like the ECB and the need to attract talent”.

But he added that the ECB’s executive pay disclosure was of “rather poor quality” and “there are many components that must be better disclosed”. He stressed that the far more detailed disclosure by listed companies “is the right reference” point.

Due to additional one-off payments and potential transition payments for the two years after her term, which will depend on her next role, Lagarde can expect a total payout of up to €6.5mn for her eight years as ECB president, equalling about €810,000 for each year.

From 2030, she can expect an annual pension of about €178,000 from the ECB, the FT analysis found.

EU law enforcement too dependent on digital infrastructure from US tech companies, Miguel De Bruycker says

Europe is so far behind the US in digital infrastructure it has “lost the internet”, a top European cyber enforcer has warned.

Miguel De Bruycker, director of the Centre for Cybersecurity Belgium (CCB), told the Financial Times that it was “currently impossible” to store data fully in Europe because US companies dominate digital infrastructure.

“We’ve lost the whole cloud. We have lost the internet, let’s be honest,” De Bruycker said. “If I want my information 100 per cent in the EU . . . keep on dreaming,” he added. “You’re setting an objective that is not realistic.”

The Belgian official warned that Europe’s cyber defences depended on the co-operation of private companies, most of which are American. “In cyber space, everything is commercial. Everything is privately owned,” he said.

This dependence was not an “enormous security problem” for the EU, said De Bruycker, who has led the CCB since it was founded a decade ago. But Europe was missing out on crucial new technologies, which are being spearheaded in the US and elsewhere, he said. These include cloud computing and artificial intelligence — both vital for defending European countries against cyber attacks.

Europe needed to build its own capabilities to strengthen innovation and security, said De Bruycker, adding that legislation such as the EU’s AI Act, which regulates the development of the fast-developing technology, was “blocking” innovation.

He suggested that EU governments should support private initiatives to build scale in areas such as cloud computing or digital identification technologies.

It could be similar to when European countries jointly set up the planemaker Airbus, he said: “Everybody was supporting the Airbus initiatives decades ago. We need the same initiative on [an] EU level in the cyber domain.”

Companies such as OVHcloud in France and Germany’s Schwarz Digital already provide crucial digital infrastructure, according to IT experts.

EU countries have been fretting about their dependency on US tech companies such as Amazon, with calls growing to increase Europe’s “technological sovereignty”.

De Bruycker said those discussions were often “religious” and lacked focus, however. “I think on an EU level we should clearly identify what sovereignty means to us in the digital domain,” he said.

“Instead of putting that focus on how can we stop the US ‘hyperscalers’, maybe we put our energy in . . . building up something by ourselves.”

Belgium, as a host of the EU institutions and Nato, has been in the crosshairs of increased hybrid attacks allegedly staged by Russia, with increased cyber assaults and drone incursions into its airspace since Moscow’s full-scale invasion of Ukraine in 2022.

Last year Belgium suffered five waves of DDoS attacks lasting days, in which compromised devices overwhelm websites of businesses and government agencies to temporarily take them down. De Bruycker said the attacks typically targeted up to 20 different organisations per day, with “Russian hacktivists” generally behind them.

Although it was unclear if the Kremlin was directly sponsoring them, the attacks generally followed as a response to anti-Russian statements by politicians.

“Sometimes . . . it’s not even a Belgian official, it’s an EU official who has said something in Brussels, and they start to attack,” he said.

Although such attacks have increased, De Bruycker does not see them as particularly harmful and says they are mostly aimed at disruption. “It’s temporary, it’s not stealing any information. It’s really disturbing the normal functioning of the website or the portal.”

After Russia’s full-scale invasion of Ukraine, the US hyperscalers were crucial in helping salvage data from Russian attacks, he said.

He also expressed confidence in continued co-operation with American companies to crack down on bad actors, despite US tech companies having aligned themselves closely with the Trump administration, which has repeatedly signalled it would step away from supporting Europe’s security.

Drugmakers plan to raise US prices on at least 350 branded medications including vaccines against COVID, RSV and shingles and blockbuster cancer treatment Ibrance, even as President Trump pressures them for cuts, according to data provided exclusively by healthcare research firm 3 Axis Advisors.

The number of price increases for 2026 is up from the same point last year, when drugmakers unveiled plans for raises on more than 250 drugs.

The median of this year’s price hikes is around 4% — in line with 2025.

The increases do not reflect any rebates to pharmacy benefit managers and other discounts.

Drugmakers also plan to cut the list prices on around nine drugs.

That includes a more than 40% cut for Boehringer Ingelheim’s diabetes drug Jardiance and three related treatments.

Boehringer Ingelheim and Eli Lilly, which sell Jardiance together, did not immediately respond to requests for comment on the reason for the price cuts.

Jardiance is among the 10 drugs for which the U.S. government negotiated a lower price for the Medicare program for people aged 65 and older in 2026.

Under those negotiations, Boehringer and Lilly slashed the Jardiance price by two-thirds.

US patients currently pay by far the most for prescription medicines, often nearly three times more than in other developed nations, and Trump has been pressuring drugmakers to lower their prices to what patients pay in similarly wealthy nations.

The increases on 350 medicines come even as Trump has struck deals with 14 drugmakers on prices of some of their medicines for the government’s Medicaid program for low-income Americans and for cash payers.

Pfizer, Sanofi, Boehringer Ingelheim, Novartis and GSK are among those companies and also plan to raise prices on some drugs on Thursday.

“These deals are being announced as transformative when, in fact, they really just nibble around the margins in terms of what is really driving high prices for prescription drugs in the U.S.,” said Dr. Benjamin Rome, a health policy researcher at Brigham and Women’s Hospital in Boston.

Rome said the companies seem to be maximizing prices while negotiating discounts behind the scenes with health and drug insurers and then setting yet another price for direct-to-consumer cash-pay sales.

An HHS spokesman declined to comment.

Pfizer announced the most list price hikes, on around 80 different drugs, including cancer drug Ibrance, migraine pill Nurtec, and COVID treatment Paxlovid, as well as some administered in hospitals such as morphine and hydromorphone.

Most of Pfizer’s increases are below 10%, except for a 15% hike of COVID vaccine Comirnaty, while some of its relatively inexpensive hospital drugs saw more than four-fold increases.

Pfizer said in a statement it had adjusted the average list price of its innovative medicines and vaccines for 2026 below the overall rate of inflation.

“The modest increase is necessary to support investments that allow us to continue to discover and deliver new medicines as well as address increased costs throughout our business,” the company said.

Larger U.S. drug price increases were once far more common.

Drugmakers have scaled them back due to criticism from lawmakers and new government policies, such as penalizing companies that charge Medicare program prices that rise faster than inflation.

European drugmaker GSK plans to increase prices on around 20 drugs and vaccines from 2% to 8.9%. The drugmaker said it is committed to reasonable prices and the hikes are needed to support scientific innovation.

Sanofi and Novartis did not respond to requests for comment.

More price hikes and cuts can be expected in early January, which is historically the biggest month for drugmakers to raise prices.

3 Axis is a consulting firm that works with pharmacist groups, health plans and some pharmaceutical industry-related groups on drug pricing and supply chain issues. It is a related entity to, and shares staff with, drug pricing non-profit 46brooklyn.

Dominion Energy is suing the Trump administration after the US Department of the Interior ordered five offshore wind projects currently under construction to stop offshore work on December 22 – including Dominion’s 2.6 gigawatt (GW) Coastal Virginia Offshore Wind (CVOW), the largest offshore wind farm in the US.

CVOW has been under construction since early 2024 and was scheduled to come online in early 2026. It’s capable of providing enough clean energy to power about 660,000 homes. Dominion said it has already spent around $8.9 billion on the $11.2 billion project, and its customers are footing the bill. Additionally, Virginia has become a hub of data center growth, making its energy needs urgent.

At the center of the dispute is a typical Trump administration claim, ie, vague, thin on evidence, and released at an awkward time (right before Christmas this time): offshore wind turbines could pose “national security risks” based on “recently completed classified reports” because their spinning blades and reflective towers can create radar “clutter” – interference that can generate false targets or mask real ones.

Dominion claims the stop-work order is “arbitrary and capricious” and unconstitutional, as offshore vessels and crews are forced to sit idle while costs pile up.

The stop-work order applies to five US offshore wind farms currently under construction: Coastal Virginia Offshore Wind in Virginia; Vineyard Wind 1 in Massachusetts; Revolution Wind serving Rhode Island and Connecticut; and Sunrise Wind and Empire Wind in New York. Democratic governors in the other four states have vowed to fight the stop-work order.

All five projects are active construction sites that rely on narrow weather windows, specialized vessels, and tightly timed supply chains.

Dominion was the first developer to file a lawsuit over the stop-work order on December 23.

In a key early move, US District Judge Jamar Walker converted the case from a temporary restraining order to a motion for a preliminary injunction. If the court grants the injunction, offshore work could resume while the broader legal fight continues.

‘Classified’ evidence

Maritime Executive reports the government told the District Court it estimates it can provide the classified information underpinning the stop-work order during the week of January 5. The court stated that the information is crucial to evaluating the request.

The judge also directed the government to inform the court by December 31 whether it will provide the confidential information to Dominion Energy’s representatives.

Next steps, per the court schedule described by Maritime Executive:

Of course, this didn’t come out of nowhere. Trump repeatedly says he wants to shut down offshore wind, and his administration has been instructed to doggedly look for ways to choke the offshore wind industry. A sudden, across-the-board stop-work order, justified by vague references to classified reports, looks like yet another attempt to kneecap projects that are already in the water.

Also, radar interference from turbines isn’t a new discovery. Dominion, for example, told the New York Times that its wind farm was situated in coordination with the military. So if there are new issues, the government should put them on the table and pursue mitigation, rather than pulling an emergency brake on five active construction sites without providing any detail whatsoever for the public – or even the developers – to evaluate what’s allegedly so urgent.

Dominion argues in its lawsuit that the order is “the latest in a series of irrational agency actions attacking offshore wind and then doubling down when those actions are found unlawful.” I reckon that’s a perfect summary.

DeepSeek has published a technical paper co-authored by founder Liang Wenfeng proposing a rethink of its core deep learning architecture

Chinese artificial intelligence start-up DeepSeek has ushered in 2026 with a new technical paper, co-authored by founder Liang Wenfeng, that proposes a rethink of the fundamental architecture used to train foundational AI models.

The method – dubbed Manifold-Constrained Hyper-Connections (mHC) – forms part of the Hangzhou firm’s push to make its models more cost-effective as it strives to keep pace with better-funded US rivals with deeper access to computing power.

It also reflected the increasingly open, collaborative culture among Chinese AI companies, which have published a growing share of their research in public.

For industry watchers, DeepSeek’s papers often provide an important early signal of the engineering choices that will shape the start-up’s next major model release.

In the paper, released on Thursday, a team of 19 DeepSeek researchers said they tested mHC on models with 3 billion, 9 billion and 27 billion parameters, and found it scaled without adding significant computational burden.

“Empirical results confirm that mHC effectively … [enables] stable large-scale training with superior scalability compared with conventional HC (hyper-connections),” wrote the researchers, led by Zhenda Xie, Yixuan Wei and Huanqi Cao.

Liang was listed as the final author.

The team added that “crucially, through efficient infrastructure-level optimisations,” mHC delivers these gains with “negligible computational overhead”.

The publication also offered fresh evidence that Liang, who has kept a low profile despite DeepSeek’s increasing fame, remains closely involved in core research at one of China’s most closely watched AI companies.

Hyper-connections were first proposed by ByteDance researchers in September 2024 as a tweak to ResNet (residual networks) – a dominant deep learning architecture introduced in 2015 by Microsoft Research Asia scientists including legendary Chinese computer scientist He Kaiming.

ResNet enables the training of very deep neural networks by stabilising the training so that key information, or residual, is retained as the number of layers increases.

It has become integral to major large language models such as OpenAI’s GPT as well as Google DeepMind’s Nobel-winning AlphaFold system.

However, ResNet has notable limitations, including difficulty ensuring that the learning signal that flows through the neural network remains strong without “collapsing” into a one-size-fits-all state.

According to the DeepSeek researchers, ByteDance’s HC solution successfully addressed these issues by expanding the residual stream and enhancing the complexity of the neural network, “without altering the computational overhead of individual units.”

DeepSeek argued, however, that the earlier approach did not fully account for rising memory costs, leaving its “practical scalability” constrained for large-model training.

Instead, they proposed an additional tweak that “constrains” the HC network with a specific manifold to ensure compute and cost efficiency.

“mHC will help address current limitations and potentially illuminate new pathways for the evolution of next-generation foundational architectures,” the researchers wrote.

The paper was uploaded to the open-access repository arXiv by DeepSeek CEO Liang Wenfeng himself, who has also posted DeepSeek’s more prominent technical papers in recent years, including work linked to its R1 and V3 models.

Other less important papers have typically been uploaded by other researchers.

Florian Brand, a PhD student at Germany’s Trier University and an expert on China’s AI ecosystem, said DeepSeek’s papers often acted as an early signal of the technical direction behind its next generation of models.

Industry expectations are running high that DeepSeek could release its next major model in the run-up to the Spring Festival holiday in mid-February.

Previously, the company released its groundbreaking R1 model on the eve of last year’s national holiday, fuelling speculation it could repeat that playbook this year.