Brexit Fashion

November 10th, 2016

Following on from Fashionista’s recent post about the potential loss of Community unregistered design rights post Brexit, Fashionista is now taking a look at the wider, economic implications for the UK fashion industry in a post Brexit Britain. The implications of Brexit add to the already difficult landscape for retailers in the UK and, with the fashion industry directly contributing £28 billion to the UK’s 2015 economy, are effects which should be heavily considered in light of the industry’s importance for the UK economy.

Image relative to politic relationships between Europe Union and United Kingdom. National flags on concrete textured backdrop. Brexit theme

The British fashion industry relies upon, amongst other things, the manufacturing industry, skilled labour and the importation of goods. These three factors will be directly affected following a ‘hard Brexit’. The industry requires skilled labour from the European Union: from designers, brand representatives and buyers to PR advisors and social media managers, as well as access to cheaper manufacturing factories based across Europe. Without the available pool of talent and favourable manufacturing inputs, operating costs may increase, retail output may fall and profit margins will suffer.

Labels will also face tough decisions about how best to deal with the weakening pound, trade restrictions and the prospect of steeper tariffs, especially if they rely on imported goods. The extent of the European community contributions to the UK fashion sector are highlighted by Patrick Grant, the head of E Tautz, who states that “most of our goods are made in the UK but…The base cloth of our cotton textiles comes from Italy. That cost has gone up. Technical fabrics and zips come from Italy. The snaps and buttons come from Germany….”.

Some retailers may attempt to swallow losses from weakening exchange rates into their margins, whilst others may respond by passing the higher costs onto consumers. Consumer demand will likely drop and retailers will be forced to compete on prices, potentially leading to a consolidation of brands and limited consumer choice. Some fashion brands, such as Next, have acknowledged the importance of currency hedging to try to protect themselves from the exchange rate risk. However, this is only a short term solution as their hedged currency stockpiles will deplete whilst the costs of goods are continuing to rise globally across all currencies, undermining any gains made through currency hedging.

The UK is home to some of the best fashion schools in the world, including Central Saint Martins with noteworthy graduates such as Paul Smith, Stella McCartney, Christopher Kane and Alexander McQueen; London College of Fashion whose notable alumni include Jimmy Choo and Rupert Sanderson; and the Royal College of Art which has strong links with luxury brand fashion houses including Prada, Burberry and Louis Vuitton. Following Brexit, questions will be raised about how to continue attracting overseas students and designers and to continue advocating the UK as an international hub of modern fashion.

However, it is not all negatives. The weaker pound means that luxury items, such as Louis Vuitton handbags, will be cheaper for overseas visitors by around $200 for a US tourist. This could bolster spending by tourists, which could help to alleviate some of the pressure from lack of domestic spending. KPMG has even suggested that Brexit may benefit British retail by increasing competition between retailers and encouraging locally sourced goods or products.

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The impact of Brexit and the identity of the post-Brexit landscape are still unknown, however it is certain that that the effects of Brexit are likely to be far wider-reaching. As Hadley Freeman rightly comments, the impact of Brexit on the British fashion industry goes far beyond the economic issues. Fashion is about image and association. Freeman is absolutely right when she notes that New York labels exude visions of Manhattan and power lunches; Italian labels encapsulate glamour; French brands ooze chic and British labels have typically played on the nation’s stereotypical characteristics, such as creativity, punk rock and heritage (shown through the regular use of tartan and tweed and references to the aristocracy and the crown). She is also right when she questions the type of image Britain which will now present, post Brexit, to the global stage. The UK retail industry may therefore be faced with, not only uncertainty over its economic environment, but also with its identity.

By: Edmund Roper
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