What effects could the Brexit have on the Fashionindustry in UK ? Introduction: In the UnitedKingdom, the creative sector as a whole represented £87 billion to the economyand employed 130 000 EU nationals in 2016. The Fashion industry hires 880 000people making it the fourth highest employer of EU nationals within thecreative 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 theirsurvey results about the Brexit Referendum.
Almost 500 designers werecontacted, 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 clearmessage4. Ninedays 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 theshocking referendum result” (Limei Hoang, 20166). Onthe 29th of March 2017, Theresa May, finally signed the letter invoking Article 50 of theTreaty of Lisbon – meaning the decision to withdraw UK from the EU. What effects could theBrexit have on the Fashion industry in the UK? A. Devaluation of the Pound 1. Cost of manufactureThis concerns brands as well as manufacturers. Many Britishfashion brands produce their products in China, India, Turkey, Italy and otherswhere they pay in dollars or euros will have to pay more.
And even if it’smanufactured in the UK, almost all the components (wool, leather, cotton) ofthe final product are imported from abroad. The devaluation of the pound mightalso affect the cost of raw materials. For example, the British brand Burberryproduces almost everything in Italy and according to researchby Sanford C. Bernstein, “65 percent of the cost of Burberry’s goods isincurred in euros”(Elizabeth Paton, 2016).
7But a weaker pound wouldn’t havejust negative effects. In fact, it could lead to lower rates and allowcompanies to invest in local manufacturing, which would be a great opportunityfor UK manufacturers if there are effective enough8.Asos already announced plans to double its UK manufacturing.9 2. Clothing price hikeAs demonstrated before, if fashion companies have tospend more money to produce the same amount of clothing, they will have tocharge 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 islikely to change due to the pound uncertainty. Nevertheless, as the pound valuedecreases, it makes UK’s goods cheaper overseas and help increase exportsaccording to Katie Hills, founder of Make it British.11 3. Margin impactBuying and selling in different currencies is thedaily deal of brands and retailers especially on e-commerce, which is why thecurrency volatility is a big problem. According to a senior figure in a multi-brand luxuryretailer, “Store buyers placing orders for brands that arepaid for on delivery will be concerned about price. If this is the price now,what will it be in six months?” (Charlie Porter, 2016).
12Which is why is itclear for the Kantar analyst, Glen Tooke, that “retailers have now two choices:they could raiseopening prices, but run the risk of having to offer deeper discounts laterbecause shoppers notice that something that cost £30 a year ago is now £35. Orthey could keep opening prices the same, but offer fewer discounts” (Zoe Wood,2016).13 B. UKout of the Single Market 1. Endof free trade In 2016, the EU wasthe biggest market for textiles and apparel for the UK representing 74% ofthose exports (worth £9.1bn)14.
As UK is leaving the single market (which offers good trade regulations withmore than 60 countries), Theresa May will have to negotiate new tradeagreements in order to export and export fashion goods. As mentioned before, aweaker pound could increase exportations but if any limitations are placed onexports it would restrict business expansion. Also, negotiating deals with China,India, Vietnam and Bangladesh as they are main producers and buyers of both rawmaterials and finished garments15as well with the USA, Brazil, Australia, New Zealand and Gulf States. 16 2. Endof free movement 1. Aloss of foreign talent and skillsA survey of the Creative Industries Federationshowed that 2/3 of the 250 businesses asked, have 75% of EU nationals employeesbecause there is a skill gap between British workers and EU ones17. Adam Mansell chief executive of the UK Fashionand Textile Association demonstrated that “A lot of that success is because ofthe fantastically skilled workers we are able to access from places likePoland, Romania, Hungary”18. But some brands won’t beable to financially help staff to get visas19 and in the end, thiscould drive companies overseas20.
UK has to keep attracting foreign talents,the country has the best fashion schools in the world. These schools producedUK designer that then worked in labels around Europe (John Galliano (Dior,Alexander McQueen (Givenchy), Stella McCartney (Chloé) …) as well as designersfrom 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 internationalstudents which might scare away new talents from studying in UK21. 2.
Difficultiesto travel abroadCreative industries like Fashion rely a lot on freelancerswho sometimes have to sign on last –minute projects.22 Models, photographers butnot only. Indeed, Jonathan Anderson for example is the creative designer ofLoewe, is based in the UK and as part of his job he has to travel every week toSpain to meet his design team. Journalists and buyers come to UK for theFashion Week will have to deal with it too. Travelling costs (fuel is priced inUS dollars) are likely to increase with pound fluctuations and with therestrictions with the visa process would make travelling more difficult23. 3. Career-limitingMany fashion companies are based in the EU andmost luxury one in France. Givenchy for example has a new artistic directorsince this year: Clare Waight Keller24.
She is British, so theywill make sure their very best talent will be able to stay in France. But whatabout all the new fashion graduates who want to work in their studio? Will theybe willing to pay for their visa?25 C. UKout of the EU1. Endof educational institutions funding The European Union offers funds forinstitutions. Thanks to the European Regional Development Fund (ERDF) LondonFashion schools received funds for research and innovation. Also, some of theBritish Fashion Council’s funding are from the ERDF, sponsoring for example theLondon Fashion Week (LFW) and sponsorships to new talents via NEWGEN26. Many creative talents like Mary Katrantzoudeveloped their brand thanks to the support of the Centre for FashionEnterprise which also receives funds from the EU27.
2. Endof protections against intellectual property In the EU, “alldesigns are protected automatically thereby saving on the costs of registering alldesigns across a portfolio” according to the BFC. Losing this would lead toclose down the LFW as designers would lose competitivity by having to “registerand show their designs in the EU first to benefit from its intellectual propertyprotections” (Limei Hoang, 2017) before the LFW28. Conclusion:The future of the Fashion industry in theUnited Kingdom is still uncertain and will be even after the 29th ofMarch 2019. So far, a weaker pound has increased the cost of production as mostof fabrics come from Europe (Euro)29 but has also boostedretail and luxury sales30 as it makes luxury goodscheaper for tourists.
Moreover, the devaluation of the sterling offers anopportunity for foreign investors and gain market share for French and Italianbrands31. And last but not least,the Brexit could be beneficial to UK manufacturers and rising interests in”British Made” labels32. Brexit might be a goodor a bad thing but in the end “We are a creative industry and we always reactto things in a creative manner, which is normally a positive manner, howeverit’s expressed” (Andrew Groves -course director of the BA in Fashion at the Universityof Westminster, 2016).