As prime minister Theresa May prepares to initiate the UK’s exit from the European Union, Drapers’ nationwide survey has identified what you need for your businesses to thrive post-Brexit.
“Every business in the industry will play a major role in ensuring we make a success of Brexit”
Theresa May, prime minister
Prime minister Theresa May has confirmed she will trigger article 50 of the Lisbon Treaty by the end of March 2017, so the UK is expected to leave the European Union by mid-2019. But what will that mean for the UK fashion industry?
Over the past few weeks, Drapers has surveyed more than 300 fashion businesses and stakeholders, including multiples, independents, brands, the British Fashion Council, the UK Fashion & Textile Association, luxury body Walpole, and several law firms, to determine the most pressing concerns surrounding Brexit, and where there may be room to negotiate a better deal.
Below, we set out the four key issues we have identified, and your views on them.
- Secure favourable trade agreements
- Ensure free movement of people
- Maintain funding for education
- Protect intellectual property and design rights
We will present this report to the government, ensuring the fashion industry’s voice is heard in the Brexit negotiations.
We believe there is an opportunity to set the political agenda. As May herself said at a Downing Street reception ahead of London Fashion Week: “From our home-grown start-ups to international fashion houses – every business in the industry will play a major role in ensuring we make a success of Brexit.”
1 Secure favourable trade agreements
Currently, UK businesses can trade with other EU countries without restriction (notwithstanding some local charges). When we leave the EU, we will re-assume direct responsibility for trade relations and will have to negotiate a new UK trade tariff. This could result in higher duties on imports from and exports to EU countries. Many respondents to our survey – who source from and sell to EU countries – are anxious about the additional costs.
36% of respondents ranked trade agreements as the number one priority in the negotiations
However, others pointed out that our EU membership prevents us from negotiating our own trade deals with non-EU countries. Brexit therefore presents an opportunity to set up new trade deals with countries such as China, the US and Japan. For many UK fashion businesses, markets outside of the EU are grower at a faster rate than those within. The process to set up these deals could be started during the next two years, so they can take effect on or soon after the date of our exit from the EU.
Whether it’s a trade agreement with the EU or other markets, our readers made it clear that, in their view, these discussions should be the number one priority in the Brexit negotiations.
Your views on post-Brexit trade agreements
“Europe is our biggest trading partner so we must sort out tariff-free access to the single market – if the price is free movement from the EU, so be it.” Owner of an independent
“If and when the UK is forced out of the single market by this decision, the priority needs to be on free trade agreements with markets we need to trade with, which would be Japan, [South] Korea, the US, Canada, Australia and New Zealand.” Senior manager/director of a trade association
“Designers need to be able to export and we need to import without going back to the old customs dockets and inspections, which cost time and money.” Owner of an independent
“Having free trade deals with countries actually succeeding economically (US, Australia, China) versus the failing EU states is a no-brainer. Our EU sales have been declining in recent years, whereas our non-EU sales have been increasing. We expect this growth to continue.” Owner of a multiple
“The UK has always had a global outlook and we should ensure good trading relations with non-EU territories as well as (and before) EU countries.” CEO of a fashion brand
2 Ensure free movement of people
While free movement of people was not ranked as high a priority as trade agreements by our survey respondents, it is still causing many people a great deal of concern.
May has made it clear that she wants the UK to have control over its immigration and has so far refused to guarantee the rights of EU citizens currently living here to stay post-Brexit. However, this could affect the UK’s ability to trade freely with the EU, as its leaders have argued that the four freedoms of movement – people, services, goods and capital – cannot be separated. There is, therefore, still a great deal of uncertainty over what will happen this right when the UK leaves the EU.
Some respondents to our survey are worried that their staff – including difficult-to-replace skilled machinists – could be forced to leave the country. Others pointed out that the UK fashion industry relies on attracting talent from across the whole world to live, study and work here, to maintain its position on the global stage. However, not everyone believes free movement of people should continue. A few respondents argued that immigration should be controlled, and that the UK should look at how to upskill its own citizens.
Your views on free movement of people
“Many skilled EU seamstresses work in the UK fashion industry and could not easily be replaced as we don’t have those skills. That would mean UK fashion exports might suffer.” Owner of an independent
“Free movement of Europeans should not even be a discussion – it should be a right.” Owner of a textile design studio
“Free movement must stop – it’s the reason millions voted leave. To ignore that would be dangerous. We want a fair, points-based immigration system, so that we can get the best shop assistants in from around the world.” Owner of a multiple
3 Maintain funding for education
Universities, the British Fashion Council, the Centre for Fashion Enterprise and myriad other institutions have access to hundreds of millions of euros in EU funding. Losing this financial support could undermine the UK’s status as a breeding ground for fashion talent. Furthermore, British businesses are eligible to apply for certain EU funds, such as Horizon 2020, a research and innovation programme that is making nearly £80bn of funding available over the seven years to 2020.
In August, the Treasury pledged to underwrite Horizon 2020 projects beyond Brexit. However, it is still not clear whether the UK government will step in to replace other lost EU funding. We need reassurance that it will.
The business incubator’s view on funding for education
We can’t wait until 2019 for answers, says Judith Tolley, incubator manager, Centre for Fashion Enterprise
“We have secured EU funding, supported by the London College of Fashion, for a new programme called ‘Fashion Technology and Emerging Futures’, which will run until 2019. Through that, we will support 325 fashion SMEs – not just ready-to-wear, but also fashion jewellery and fashion tech businesses.
“The EU-funded projects we run deliver real economic results. They create jobs and employment opportunities through business growth, innovation and the development of new products and services. Supporting fashion technology SMEs is crucial, as they have the potential to scale up much faster than ready-to-wear and are part of the new fashion eco-system.
“After 2019, we don’t know where we’ll find money to support this innovation. Is the UK government going to help? We can’t wait until 2019 to find out, we need to think about it now.”
4 Protect intellectual property and design rights
There has been a huge amount of speculation on the future of various intellectual property laws following Brexit, and this was identified as a key concern by the British Fashion Council during a series of Brexit roundtables held with designers over the summer.
UK fashion businesses are currently subject to, and can take advantage of, EU trademarks and EU-wide design protection laws. Some lawyers have argued that we cannot simply fall back on our own laws after Brexit, as they are not all fit for purpose. The government must provide clarity on whether certain EU directives will continue to apply in the UK post-Brexit, and what will be done to tighten up UK legislation.
The legal view on intellectual property post-Brexit
UK design rights are at risk, says Simon Bennett, partner at law firm Fox Williams
“My main concern is around what will happen with EU trademarks and registered design rights post-Brexit. At the moment, UK fashion businesses can register an EU trademark or design right and it protects them in all 28 EU countries. Once we leave the EU, that trademark or design right will no longer cover the UK. We need reassurance that any existing EU trademarks or design protection will automatically extend to the UK post-Brexit, and that the cost will be absorbed by the government.
“In addition, unregistered rights protection will change for designs: if we lose the EU unregistered design right, we will have to rely on copyright to cover surface decoration for clothing and this is harder to protect. I would look to the government to amend the UK right to allow surface decoration to be included.”
The other issues at stake
These are the four main priorities you have identified for the Brexit negotiations, but there are, of course, other matters of concern. Over the past couple of years, the fashion industry has been hit by a perfect storm of rising costs, a sluggish economy, unseasonable weather, aggressive discounting and changing consumer behaviour. Since the Brexit vote in June, this has been compounded by currency headwinds.
We need reassurance from the government that, in tandem with the Brexit negotiations, it will re-examine how it supports the industry and wider economic growth. Is the business rates system fit for purpose? Is the apprenticeship levy being pushed through too quickly? Is there enough funding for skills development and innovation? How else can the government ease the burden?
The optimists among you predict a strong revival in UK manufacturing as we learn to stand on our own two feet outside of the EU. Earlier this month, N Brown Group said it was looking at reshoring some of its manufacturing, and it is not the only one. But again, a revival would only be possible with the help of the government.
Our campaign focuses on the desired outcome from the Brexit negotiations, but these wider issues must be part of the conversation. The British Retail Consortium is lobbying the government on behalf of larger retailers over trade tariffs (see box, below) and similarly argues that domestic policy must support the sector’s growth. We have extended this to the entire fashion industry, including indies, brands and manufacturers.
The issues will evolve as time goes on and the government’s Brexit plan becomes clearer. But we believe speaking out about these now, and keeping pressure up over the next two years, will ensure important policies do not slip between the cracks.
A fair Brexit for consumers
Helen Dickinson, chief executive of the British Retail Consortium
Naturally enough, much of the focus of national debate since the EU referendum has been on exports in the post-Brexit era. But we forget at our peril the potential impact on imports – and on the household budgets of every British citizen.
At the moment, all trade within the EU single market is free of import duties, and through the EU, Britain has arrangements with other countries offering preferential tariffs on imports.
We can’t prejudge the strategy of our Brexit negotiators or, of course, the outcome of the talks, but if these beneficial arrangements were simply to end, we would fall back on our status as a member of the World Trade Organization, which would for the most part mean a significant hike in import tariffs.
If this were to be the case – and I’m not at all suggesting this is the most likely outcome – duties imposed on, say, a skirt from Bangladesh could rise by 12%. Fashion retailers, struggling with the added cost from the sterling devaluation and the rising burden of taxation, have little scope to absorb this.
Undoubtedly, there will also be opportunities to reduce the costs of international trade outside the EU. Some of these may take time to materialise – free trade agreements typically take five or six years to negotiate.
But other opportunities to liberalise trade could be realised more quickly. For example, the UK would be free to adopt its own scheme of trade preferences for developing countries as soon as it leaves the EU, expanding the number of countries that benefit, cutting red tape and reducing the number of exemptions.
While we remain optimistic that we can help the government in striking a deal that will mean no increased tariffs on everyday goods, we know that, unless we all focus firmly and resolutely on this goal, the interests of individual families could become drowned out in the noise of battle.
Helping retailers to keep prices low in the post-Brexit world will benefit each and every one of us at a time when the economic outlook is uncertain, and when citizens will be looking to the government to put their interests first.
Brexit threats and opportunities
The British Fashion Council ran a series of off-the-record roundtables over the summer.
It identified three key concerns around Brexit:
- Intellectual property regulations
- Talent and visas
And three key opportunities:
- Lobbying the government for tax incentives
About Drapers’ survey
We ran the survey online between 17 August and 16 September. There were more than 300 respondants – 48% from people in London and 52% from the rest of the UK. Responses came from a wide spread of industry stakeholders, including retailers, brands, designers, agents, distributors, suppliers, manufacturers, consultants, students and educators.