UK manufacturers and brands have told Drapers they will be unable to absorb the impending 25% tariff on UK clothing exported to the US, and job losses are likely to result.
The World Trade Organization ruled last week that the US could impose tariffs on $7.5bn (£6bn) of European goods from 18 October. It is the latest chapter in a 15-year battle between the US and the European Union over illegal subsidies for aircraft manufacturers Airbus and rival Boeing.
Clothing and textiles exported from the UK affected by the decision include wool, cotton and cashmere sweaters; windbreakers and jackets; men’s and boy’s suits; women’s and girls’ pyjamas and women’s and girls’ swimwear.
“It is absolutely catastrophic in terms of the impact on [our knitwear and cashmere products],” said Simon Cotton, chief executive of Johnstons of Elgin.
“In the long term, we will have to increase the price to consumers to cope with that. We will try to cushion them from the worst of that, but we won’t be able to absorb as much as 25%.”
He added: “The US market is our third-biggest export market behind Europe and Japan. It has been growing very well, at 40% this year, and we were targeting it for more growth next year. We will [now] have to review that.”
The UK Fashion and Textiles Association (UKFT) has estimated that the total value of UK exports to the US on the products affected at just over £35m, and the new tariff will cost around £8.8m.
“Jobs will be lost, and investment won’t be happening – it’s as bleak as that,” Adam Mansell, CEO of UKFT told Drapers. “Everyone is looking to markets like the US to be the growth market, but there isn’t a spare ounce of flesh on the prices that [UK manufacturers and brands] sell on. [Brands] can’t pass it on to US retailers, so they will have to absorb it. We are talking hundreds of thousands of pounds for [each] company.”
Savile Row tailors will be some of the hardest hit by the tariff – and the impact will be doubled by the fact that competitors from Italy have not been penalised.
“An awful lot of us have a bigger market in the US and it’s going to discourage people like myself, who have fought long and hard battles to continue manufacturing in the UK,” said Tony Lutwyche founder, creative director and executive chairman of men’s tailor Lutwyche.
Lutwyche maintained he would continue to make in the UK and called for the government to underwrite the tariff: “The impact of not doing so could be quite dramatic on small communities. The cost of those jobs being lost would be easily more than the [£8.8m] it will cost to underwrite the sector.”
Others said the tariff would push British brands and retailers to grow other export markets including the Middle East and China.
“Next, Sweaty Betty and Arcadia Group all export strongly into the US. This news will encourage retailers to look at other export markets such as China,” said Jenny Holloway, chief executive at London manufacturer Fashion Enter.
Meanwhile, Kate Hills, founder of manufacturing trade show Make It British, was concerned the new tariff would quash any resurgence in made in Britain manufacturing.
“You’d love to be able to say post-Brexit this will encourage more people to buy British-made products, but unfortunately it is the export market that sees the most growth in the UK labels.
“My concern [is] that our government doesn’t understand how much this could affect the resurgence [in UK manufacturing] that we have seen over the past two years.”