LONDON: The global luxury goods industry recorded growth of just 2.4% last year, significantly down from 2012's 10.4% rise, a new report has revealed.

According to the luxury and cosmetics financial factbook 2014 from EY, the professional services firm, this made 2013 perhaps the "most challenging" year since the recession of 2009 for luxury companies.

It calculated the global luxury market at €217bn in 2013 and also noted that the global cosmetics market recorded modest growth of 3.8%, suggesting an overall valuation of €175bn for the year.

However, more positively, EY forecast growth in the luxury market of between 4% and 6% over the next couple of years and that China will remain a key market. The industry also maintained profitability despite last year's decline in growth, EY said.

Chinese consumers accounted for about a third of global luxury spend in 2013, but are expected to add up to 40% to luxury growth by 2020 as incomes rise and teenagers push demand.

That said, EY warned brands that the Chinese market is coming under pressure from new government regulations against gift-giving, higher prices caused by luxury sales taxes and changing consumer trends.

Chinese consumers are becoming more discerning, for example, and have a growing desire for more high-end products. They also lack brand loyalty, the report said, and want more use of digital channels.

Turning to the cosmetics market, EY said the longer term outlook remains positive as the number of consumers with access to these products in emerging markets is expected to increase by 50%.

Consequently, the beauty industry is expected to double in the next 10 to 15 years as more and more consumers in tropical climates or living in relatively polluted cities seek out high quality cosmetics.

Luxury brands also need to ensure they have online and ecommerce strategies in place, EY advised. Although online business accounted for only 4.5% of global sales, EY said the sector is growing at a "massive" 30% year on year.

Data sourced from EY; additional content by Warc staff