What effects could the Brexit have on the Fashion
industry in UK ?

 

Introduction
:

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In the United
Kingdom, the creative sector as a whole represented £87 billion to the economy
and employed 130 000 EU nationals in 2016. The Fashion industry hires 880 000
people making it the fourth highest employer of EU nationals within the
creative industry (Grace Cook, 20171).
This industry was worth on its own £26bn to the UK’s economy in 20142 and
£28bn in 20153.
On the 14th June 2016, the British Fashion Council released their
survey results about the Brexit Referendum. Almost 500 designers were
contacted, 290 responded. With 90% in favour of Remain, 4.3% for Brexit, 2.4%
undecided and 2.8% that stated they wouldn’t vote, these results sent a clear
message4. Nine
days later, on June 23, Britain voting to leave by 51.9% was a breaking news5. As soon as it was announced the pound
“plummeted to its lowest level against the dollar in 31 years in reaction to the
shocking referendum result” (Limei Hoang, 20166). On
the 29th of March 2017, Theresa May, finally signed the letter invoking Article 50 of the
Treaty of Lisbon – meaning the decision to withdraw UK from the EU.

 

What effects could the
Brexit have on the Fashion industry in the UK?

 

A.   Devaluation of the Pound

 

1.     Cost of manufacture

This concerns brands as well as manufacturers. Many British
fashion brands produce their products in China, India, Turkey, Italy and others
where they pay in dollars or euros will have to pay more. And even if it’s
manufactured in the UK, almost all the components (wool, leather, cotton) of
the final product are imported from abroad. The devaluation of the pound might
also affect the cost of raw materials. For example, the British brand Burberry
produces almost everything in Italy and according to research
by Sanford C. Bernstein, “65 percent of the cost of Burberry’s goods is
incurred in euros”(Elizabeth Paton, 2016).7
But a weaker pound wouldn’t have
just negative effects. In fact, it could lead to lower rates and allow
companies to invest in local manufacturing, which would be a great opportunity
for UK manufacturers if there are effective enough8.
Asos already announced plans to double its UK manufacturing.9

 

2.     Clothing price hike

As demonstrated before, if fashion companies have to
spend more money to produce the same amount of clothing, they will have to
charge more for the final product which means increasing its price. Even though
“most companies have hedged their currency exposure for the next 6 to 9 months,
prices are still likely to be affected in the long run” (Vivian Hendriksz,
2016)10. For the past six years,
UK consumer had a low inflation and almost no price increases but this is
likely to change due to the pound uncertainty. Nevertheless, as the pound value
decreases, it makes UK’s goods cheaper overseas and help increase exports
according to Katie Hills, founder of Make it British.11

 

3.     Margin impact

Buying and selling in different currencies is the
daily deal of brands and retailers especially on e-commerce, which is why the
currency volatility is a big problem. According to a senior figure in a multi-brand luxury
retailer, “Store buyers placing orders for brands that are
paid for on delivery will be concerned about price. If this is the price now,
what will it be in six months?” (Charlie Porter, 2016).12
Which is why is it
clear for the Kantar analyst, Glen Tooke, that “retailers have now two choices:
they could raise
opening prices, but run the risk of having to offer deeper discounts later
because shoppers notice that something that cost £30 a year ago is now £35. Or
they could keep opening prices the same, but offer fewer discounts” (Zoe Wood,
2016).13

 

B.   
UK
out of the Single Market

 

1.    
End
of free trade

 

In 2016, the EU was
the biggest market for textiles and apparel for the UK representing 74% of
those exports (worth £9.1bn)14.
As UK is leaving the single market (which offers good trade regulations with
more than 60 countries), Theresa May will have to negotiate new trade
agreements in order to export and export fashion goods. As mentioned before, a
weaker pound could increase exportations but if any limitations are placed on
exports it would restrict business expansion. Also, negotiating deals with China,
India, Vietnam and Bangladesh as they are main producers and buyers of both raw
materials and finished garments15
as well with the USA, Brazil, Australia, New Zealand and Gulf States. 16

 

 

2.    
End
of free movement

 

1.    
A
loss of foreign talent and skills

A survey of the Creative Industries Federation
showed that 2/3 of the 250 businesses asked, have 75% of EU nationals employees
because there is a skill gap between British workers and EU ones17. Adam Mansell chief executive of the UK Fashion
and Textile Association demonstrated that “A lot of that success is because of
the fantastically skilled workers we are able to access from places like
Poland, Romania, Hungary”18. But some brands won’t be
able to financially help staff to get visas19 and in the end, this
could drive companies overseas20. UK has to keep attracting foreign talents,
the country has the best fashion schools in the world. These schools produced
UK designer that then worked in labels around Europe (John Galliano (Dior,
Alexander McQueen (Givenchy), Stella McCartney (Chloé) …) as well as designers
from the EU that then worked in the UK (the Greek Mary Katrantzou for example).
Leaving the EU, also means having to pay the same price as international
students which might scare away new talents from studying in UK21.

 

2.    
Difficulties
to travel abroad

Creative industries like Fashion rely a lot on freelancers
who sometimes have to sign on last –minute projects.22 Models, photographers but
not only. Indeed, Jonathan Anderson for example is the creative designer of
Loewe, is based in the UK and as part of his job he has to travel every week to
Spain to meet his design team. Journalists and buyers come to UK for the
Fashion Week will have to deal with it too. Travelling costs (fuel is priced in
US dollars) are likely to increase with pound fluctuations and with the
restrictions with the visa process would make travelling more difficult23.

 

3.    
Career-limiting

Many fashion companies are based in the EU and
most luxury one in France. Givenchy for example has a new artistic director
since this year: Clare Waight Keller24. She is British, so they
will make sure their very best talent will be able to stay in France. But what
about all the new fashion graduates who want to work in their studio? Will they
be willing to pay for their visa?25

 

C.   
UK
out of the EU

1.    
End
of educational institutions funding

The European Union offers funds for
institutions. Thanks to the European Regional Development Fund (ERDF) London
Fashion schools received funds for research and innovation. Also, some of the
British Fashion Council’s funding are from the ERDF, sponsoring for example the
London Fashion Week (LFW) and sponsorships to new talents via NEWGEN26.

Many creative talents like Mary Katrantzou
developed their brand thanks to the support of the Centre for Fashion
Enterprise which also receives funds from the EU27.

 

2.    
End
of protections against intellectual property

 

In the EU, “all
designs are protected automatically thereby saving on the costs of registering all
designs across a portfolio” according to the BFC. Losing this would lead to
close down the LFW as designers would lose competitivity by having to “register
and show their designs in the EU first to benefit from its intellectual property
protections” (Limei Hoang, 2017) before the LFW28.

 

 

Conclusion:

The future of the Fashion industry in the
United Kingdom is still uncertain and will be even after the 29th of
March 2019. So far, a weaker pound has increased the cost of production as most
of fabrics come from Europe (Euro)29 but has also boosted
retail and luxury sales30 as it makes luxury goods
cheaper for tourists. Moreover, the devaluation of the sterling offers an
opportunity for foreign investors and gain market share for French and Italian
brands31. And last but not least,
the Brexit could be beneficial to UK manufacturers and rising interests in
“British Made” labels32. Brexit might be a good
or a bad thing but in the end “We are a creative industry and we always react
to things in a creative manner, which is normally a positive manner, however
it’s expressed” (Andrew Groves -course director of the BA in Fashion at the University
of Westminster, 2016).

 

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