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Industry calls for free-trade Brexit deal

UK fashion retailers and suppliers have voiced fears the industry could face rising costs and uncertainty if the UK is unable to secure a favourable free-trade agreement with the European Union.

Prime minister Theresa May this week presented her proposals to leave the EU customs union and create a “facilitated customs agreement” that removes the need for border checks by treating the UK and EU as a single territory.

The UK would collect EU tariffs from external importers and return them to the bloc, and vice versa. However, the two entities would set their own import levies.

May has yet to present the proposals to the EU, which has made no indication of whether it would approve them.

One supplier to the EU, US and UK markets said he would have to remodel his entire business if there was a failure to secure restriction-free trade.

“We would have to change and become a distributor in the UK. That comes with challenges: first we would need a warehouse in the UK. We would need to buy goods up front and we would need much more cash available.

“We have contingency plans in place but we are not investing in the UK at this moment in time. We have a rule never to be busy fools, so if we can’t make money, then we won’t continue [as a distributor].”

The chief executive of one UK retailer said he was unable to plan effectively beyond March 2019, when Britain is due to leave the EU: “All we can do is ask politicians to stop playing politics. People seem like they want to derail it for their own game. You can only plan for what you know, and that isn’t much. However, we will adapt and always have.”

The chief executive of another large multiple said: “Most of our business is outside the UK, so [any duties] will only hit the UK business and our European supply base, which is small.

“However, the most important thing is to get clarity on what’s happening. Businesses need to know what’s going on so they can plan. Until we get that we are all drifting.”

One supplier said very little was known until negotiations with the EU had progressed further: ”At present the problem is you only have one side of the equation. Until you know what customs plans [are], there is a wariness from people abroad dealing with the UK.

“If you adapted your business for the worst-case scenario, you would close down.”

If the UK does not reach a deal with the EU, World Trade Organisation (WTO) rules will come into effect: tariffs on clothing from Bangladesh could rise from 0% to as high as 25%, from Vietnam to 19.7% and Cambodia to 15%. The WTO says the UK’s future trading relationship will be “shaped to a very large extent by the terms of the EU-UK separation agreement and subsequent WTO negotiations”.

One supplier said additional tariffs would wipe out many retailers’ margins overnight: “Considering WTO terms, we are concerned that, if there is nothing in place, then it falls back to standard rate. So many retailers are on such tight margins, unless they bring their buying forward, prices of garments are going to have to go up.

“This industry moves its feet very quickly, [but there] may be casualties.”

Readers' comments (4)

  • Cherry picked views from what is a biased article. Does this reflect the whole Industry? Of course not.

    If prices go up, so be it. Retailers will need to put their prices up pro-rata, which is fine. Prices need to go up anyhow.

    Where is the problem here?

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  • @Anonymous:

    ‘If prices go up, so be it. Retailers will need to put their prices up pro-rata, which is fine. Prices need to go up anyhow.’

    Do you hold the same opinion on other cost pressures, such as rising business rates, rising rents, and minimum wage increases? Or is it only Brexit-related cost rises of which you’re so tolerant?

    If you’re looking for opinion that reflects ‘the whole industry’, I suggest you look to the British Retail Consortium, whose position on Brexit (stated here: airs precisely the priorities emerging from the opinion canvassed for this article; that is, the utmost importance of a tariff-free deal, and a frictionless customs border.

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  • Whilst i don't necessarily agree that the article is bias i actually also think the Retail Consortium doesn't reflect the whole Industry, like the UK it will be split with some seeing opportunity other seeing adversity. Rising costs etc are already resulting in casualties and will continue to do so. I've been in this business for over 30 years i can def say we need a correction, too much competition, look at the state of the High Street. E-tail, Rates, Rents, Min Wage, Super Market Fashion (or not!!) etc etc and now perhaps Tariffs, yet despite this some of us are still here and we will still be here after Brexit. For the survivors!!!, ethical, sustainability will be key but one thing that remains constant is making the customer buy, a purchase because they must have it. Prices are going up, about time!!!!!!, how about we sell less at a better margin. Multiples may have to look at making 10's of millions rather than 100's of millions but perhaps best not open up a new can of worms..

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  • darren hoggett

    While I believe the possibility of the effects of a 'no deal 'are greatly exaggerated, the upside of this could be a much more consolidated industry where discipline is a must.

    For too long, cheap goods and over generous credit and payment terms have meant some retailers have completely lost their way in buying and the necessary skills to run a business successfully.

    While price increases aren't exactly a bad thing - and some would argue overdue - this will mean retailers must make the absolute most of their resources, meaning there will be no time for dated business practices, poor management and hangers on.

    Survival is very much in the retailers own hands.

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