The weakening pound and rising prices are the primary concerns for own label suppliers and brands following the outcome of the European referendum.
Overnight the pound dropped 11%, slumping to a three decade low of $1.32 against the dollar, the lowest level since 1985.
Tristan Haddow, chief executive of supplier the Haddow Group said: “I must admit that the decision was unexpected so we have been working through the immediate effects for us as a business this morning, which are primarily our exposure to the currency markets.”
He continued: “The fluctuation in currencies make buying decisions increasingly difficult for our customers and as most of the goods we trade are imported, so the additional cost has to be either absorbed in the supply chain or passed to the customer. When overall demand is lower, it is challenging to pass any increase to the consumer and the supply chain is already extremely lean after years of cost reductions. At a time when most retailers are directly focussed on their margins, this will create very tough and conflicted trading conditions for both manufacturers and importers.”
Jason Gerrard, co-founder and chief executive of men’s suiting brand Without Prejudice agreed: “The first and primary impact on the already pressurised fashion industry will be currency. As we import everything and manufacture abroad the major shift in the pound will have an inevitable and negative impact to both supplier and retailer alike.”
He added: “On a secondary note the fragile consumer confidence is bound to be affected with the uncertainty of the coming months. Personally the outcome is both extremely disappointing and deepens concerns about our economy and that of Europe as a whole right now. It’s rather like turkeys voting for Christmas.”
Derry Curry, managing director at footwear supplier Park Lane Shoes said: “I’m trying very hard to see anything positive but I can’t. This will lead to turmoil and will be a disaster for a generation- I can’t see what we gain. Sterling’s gone through the floor, although I do expect it to recover over time. The biggest things we’ll lose out on are the lower cost and increased convenience of doing business overseas. I don’t think people realise how complicated doing business in Europe will be now.”
Mahesh Patel, managing director of high street supplier SRG, said: “It’s a very sad day and the biggest mistake ever in my humble opinion. The average person voted without knowing the true ramifications of an exit and in time to come the same people will start crying. Retail prices will go up, house prices will go down and there is a real risk of job cuts. There is going to be long term uncertainty to the economy and it’s going to be a choppy ride so let’s all pray for some good to come out of it but I cannot see it.”
Andy Tompsett, head of UK for British menswear brand Merc was more optimistic: “There will be winners and losers. Merc is a British exporter and this has saved even more price increases for our export customers. The prolonged uncertainty with a new Tory leader to be elected will be tough as we get used to the situation, but maybe this will give the UK consumer more passion to spend.”
One footwear supplier added: “It is short term pain for long term gain. We will push on with our business and whilst we cannot predict what will happen we are agile enough to keep increasing our business.”
Ben Banks, director at agency Fourmarketing said: “The immediate most notable effects of course are FX markets I think most other possible issues will take many months and into years to unravel, and maybe during that time there will be moderation from EU.”
Juls Dawson, co-founder of agency Just Consultancies said: “It’s going to be interesting to see how it pans out. I’ve already had suppliers concerned about pricing, but the Bank of England has stepped in now so that should steady Sterling at least in the short-term. I’m hoping it’s just initial panic and that when the dust settles in the upcoming months things start to look a bit more positive.”
Ian Campbell Smith, director of fashion agency Palladio Associates said: “As the UK enters a period of economic and political uncertainty, in the short-term we hope that any impact on retail will be limited until the situation clears. In the medium-term any drop in the value of sterling could lead to both increased costs in raw materials for UK manufacturers and increased costs of goods imported into the country by retailers, leading to higher retail prices. Coupled with uncertainty over property values our prospects do not look wholly positive.”
He added: “Long term retail success very much depends on the stability gained from the type of trade deals we can strike, both with our neighbours in Europe and with other trading partners. We are a great trading nation, and a strong UK is vital to the worldwide fashion business. Our creativity will not diminish, and our ability to retail imaginatively and professionally will also not be affected.”