A hard Brexit could be “catastrophic” for the fashion industry, writes Cécile Reinaud, founder and president of maternitywear brand Seraphine.
A hard Brexit is a lethal weapon to UK SMEs and our shining fashion sector. Both would be hit particularly badly.
The nature of fashion is that we source and manufacture abroad. Most brands then export worldwide. In the case of Seraphine, 70% of our £25m turnover comes from exports, and 40% of that sum from the European Union. Delays at the border stretching into months have been highlighted by the government’s own studies on the impacts of a no-deal Brexit, and initial estimates of a few weeks stretch to three or four months of chaos.
For an ecommerce business such as ours, any overt delays between dispatch and receipt are unacceptable. We would expect most of our orders to be cancelled by angry customers.
A hard Brexit is predicted to send the pound in a further freefall
The significant drop in the value of sterling has also already affected retailer margin, as most of us source outside the UK and purchase our goods in US dollars or euros. A hard Brexit is predicted to send the pound into further freefall, which I most certainly expect to result in a huge number of fashion businesses having to file for receivership.
Only those businesses with very solid cashflows and no expensive debt to service would survive such a catastrophic turn of events. This could also have a domino effect in terms of unemployment and the potential for social unrest.
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Furthermore, we are being offered little reassurance by the government, which simply states that we would fall under the WTO’s (World Trade Organization) trading regime. This means that exports to the EU would be subject to the same customs checks, tariffs and regulatory barriers that the UK and EU currently charge on trade with countries such as the US, and this would result in damage to profits.
What few people realise is that there is only one country in the world that trades solely on WTO terms. Mauritania, one of the smallest economies on earth. Every other country has a multitude of other international trade agreements in place to facilitate imports and exports. How on earth can the fifth-largest world economy be expected to work solely within the WTO framework? It would take months to secure new agreements, and it is completely unacceptable that the British economy could be sabotaged in that way.
We had to prepare ourselves for the worst-case scenario of a hard Brexit to protect the business
With the threat of a no-deal Brexit looming relentlessly for the past couple of months, many companies have had to mitigate the threats of business disruption by opening up distribution centres in Europe. The effect of such massive expense further impacts the British economy by reducing headcounts at home.
At Seraphine we are opening a distribution centre in Belgium and will no longer operate with a centralised warehouse that services the whole of Europe. Not only is this far less efficient from a cost perspective, it also forces us to increase our stock, which in turn reduces our cashflow. We weighed the pros and cons of this approach for several months but in the end, we had to prepare ourselves for the worst-case scenario of a hard Brexit to protect the business.
Finally, I have concerns over the immigration restrictions that will hinder and put off key international talent from coming to work in Britain. The fashion sector is massively dependent on highly specialised skills such as pattern cutting and machining, both of which are a scarce resource in the UK.
Immigration restrictions will hinder and put off key international talent from coming to work in Britain
We simply do not have enough highly trained and experienced people in this specialised field. With a shortage of skills in the market, wage inflation will add yet more cost.
Ultimately, of course, it will be the consumer who has to pay for a hard Brexit, as price inflation on goods and services hits disposable income hard. I wholeheartedly support the avoidance a no-deal Brexit, and when prime minister Boris Johnson says “Brexit do or die”, I say the British economy will be a dead man walking if there is a hard Brexit.