"The fashion industry directly contributed £28 billion to the UK’s economy in 2015 and employed 880,000 from manufacturing to retail. The impact of Brexit on the fashion industry is multi-leveled. Post Brexit, there will be an immediate hit on costs and margins for many British designers and stores. According to analysts, once Brexit has been achieved, it could jeopardise design talent and retailers within the global marketplace forever."
The fashion industry directly contributed £28 billion to the UK’s economy in 2015 and employed 880,000 from manufacturing to retail. The impact of Brexit on the fashion industry is multi-leveled. Post Brexit, there will be an immediate hit on costs and margins for many British designers and stores. According to analysts, once Brexit has been achieved, it could jeopardise design talent and retailers within the global marketplace forever.
The British Fashion Council (BFC) during the campaign reported that of the near-500 designers it polled, 90 per cent planned to vote for ‘Remain.’ In the short term, some in the industry are happy.
The fall in the pound is good news for retailers that have a large tourist pull, with Harrods reporting a strong start to its summer sale. There is some respite also for Burberry, which in May announced a £100m cost-cutting drive after a 10 per cent fall in profits. Burberry should benefit from a weaker pound, given significant currency imbalances, according to Thomas Chauvet, luxury analyst at Citi.
Head of luxury goods at Exane BNP Paribas, Luca Solca calls this positive effect ‘margin tailwind.’ But he sounded a note of caution. Brexit, and the turmoil in financial markets, is likely to have negative repercussions, he said, reflecting the bank’s revising down of 2016-17 growth estimates. Consumers may pause before spending, and businesses may pause before committing to capital investments. Buyers and retailers are nervous about speaking openly. They want consumers to continue shopping as if nothing has happened.
In a global marketplace, stores work with extremely complex business models, especially dotcom retailers, which buy and sell in multiple currencies. Currency volatility is a huge worry. Store buyers placing orders for brands that are paid for on delivery will be concerned about price. Meanwhile, the only way many young British designers can afford to make their products is by having them manufactured abroad. This will now be more expensive.
Restriction on movement
One of the key topics of the referendum was immigration. In Blackburn factory, two-thirds of the workers are East Europeans because they don’t have the skilled labour in UK. Many are now lobbying for the future of British fashion, particularly the free movement of people. The BFC sits on the Creative Industries Council, a government-run forum. The fashion industry’s message aligns with those of other creative industries. More directly, some of BFC’s funding comes from the European Regional Development Fund.
Other bodies are also in danger of losing funding. It’s about job creation, feels Judith Tolley, Manager of the Centre for Fashion Enterprise (CFE), which supports emerging brands with funding from the EU that’s matched with funds from the London College of Fashion. The CFE has funding of £5.3m secure for a new three-and-a-half-year project supporting fashion and tech pioneers in the UK.
Movement restriction could be career-limiting for UK fashion graduates. British talent has flowed freely into European houses for decades, helping to define the look of the luxury era. It’s the history of the past 20, 30 years. LVMH, Kering and all those companies will want to arrange visas for the best talent. Think about the top creative directors such as John Galliano, Phoebe Philo, Stella McCartney and the late Alexander McQueen. But it could make a difference to all the hundreds of graduates who staff the design studios.