Even in a year of shocks and surprises worldwide, the British public’s vote to narrowly back Brexit stands out as one of the biggest. For anyone in the U.K. involved in selling apparel online or off, it’s a decision that’s going to have enormous implications for at least the next decade.
Thanks to the peculiarities of mechanisms such as Article 50, however, what some of those implications might actually be is very much still up in the air. Both industry leaders and the general public are looking at a minimum of two years before we have a full picture of what shape a British exit from the European Union will actually assume.
Fit Analytics is a company with strong European roots, and we’re proud to help a host of major British brands and retailers solve sizing and boost their bottom lines. Naturally enough, we’ve been keeping a pretty close eye on Brexit-related events throughout the year!
In this piece, we’ll round up some of the reaction from the industry to date, and assess areas of particular potential concern as we wait for negotiations to start in earnest. Let’s begin with a quick reminder of just how important fashion and luxury brands are to the British economy as a whole.
Fashion and Luxury Brands Are Key British Economic Assets
As the Financial Times was quick to point out in the immediate aftermath of the June vote, fashion is one of the U.K.’s strongest economic performers. The industry is a core part of the creative sector, employs over 880,000 people directly throughout Britain, and contributed an impressive £28 billion to the public coffers in 2015 alone – long story short, what’s good for fashion, is good for the British economy overall.
Industry Reaction to Brexit Has Been Far From Enthusiastic
As an industry with strong European and global ties, it’s perhaps not surprising that U.K. fashion folk were largely unenthusiastic about the prospect of Brexit – even before the results came in.
Aside from some notably high-profile exceptions such Next’s Simon Wolfson, the vast majority of the industry appeared to be strongly in the Yes camp prior to voting. A pre-referendum poll of 500 designers by the British Fashion Council showed a whopping 90% in favour of staying, and prominent fashion figures such as former Burberry CEO Christopher were among business leaders urging Britain to remain in open letters to The Times.
That early antipathy stayed strong post-referendum, with the folks at Retail Connections doing a great job of capturing much of the early industry reaction. As might be expected, little of it was positive. It wasn’t long before the first round of fashion-related Brexit think pieces started hitting the digital presses – many of them speculating that “Brand Britain” itself had just taken a major knock.
Currency Changes Cut Both Ways
Against the backdrop of a challenging economic year for U.K. retailers, one potential Brexit-related plus point that many were reaching for was the prospect of a weaker pound making luxury British goods more attractive. With the pound duly plummeting against other currencies since July, that’s a scenario that’s played out to a certain extent, but it doesn’t paint the full picture.
As Esquire pointed out early, many British brands outsource heavily to China and other Asian countries where they are charged in dollars. In other words, increased overseas consumption can easily be overshadowed by huge increases in production costs across the Asian supply chain.
Things are no less complex closer to home. As Charlie Porter noted in his excellent analysis at the Financial Times, British manufacturers will also face notable cost increases from European suppliers. He also highlighted the potentially enormous headache that volatility presents for online stores who buy and sell in multiple currencies.
Brands and Retailers Face a Nervous Wait for Negotiations
One of the most unsettling aspects of the Brexit situation is that we’re currently largely in the dark about how it will actually play out in practice. Though the campaign itself was defined by ill-advised sloganeering, the reality of the result will have to be hammered out in endless detail for a number of years to come. We’re still merely at the sabre-rattling stage of pre-negotiation.
As with most things in life, if you want a clinically precise overview of a complex situation, it’s often best to talk to a lawyer – the good people at Hogan Lovells have done sterling work in that regard by summing up the slightly terrifying amount of factors that are going to have to be addressed.
Even a quick glance at their overview shows that the issues involved here are weighty ones which have the potential to cause operational and logistical chaos if not handled correctly. The legislative aspect alone could be a bitter pill to swallow for brands and retailers, and the prospect of revised trade tariffs across the board won’t make life any easier. Uncertainty over freedom of movement is also very bad news indeed for an industry that has traditionally brought many of its best and brightest from across Europe to the U.K.
This is a story that’s going to run and run, so we’ll doubtless be returning to it as further events unfold. There’s a huge amount still to play for in what promises to be a hard-fought series of negotiations that may well drag on for years. The U.K. fashion industry’s reaction to date shows that they’re further ahead of the curve than most in being aware of the very real challenges that Brexit will bring – we can only hope that their warnings are heeded when the hard talking finally begins.