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What does Brexit mean for the fashion industry?

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Posted on July 01 2016

Brexit. What does it mean for the fashion industry?On Thursday, Britain voted to leave the European Union. After staying up into the early hours to watch the results unfold, I spent numerous hours over the next few days watching my TV and social media channels as the shock set in, not only amongst ‘remain’ voters, but also across the rest of the world.

As the owner of a small business that relies on spending within my shop; as a business that works closely with early stage brands and manufacturers, and also as someone taking their first steps into an ‘own brand’, I had a number of questions. What does this mean for businesses like mine? What does this mean for designers coming out of fashion college thinking about starting their own brand? How will the early stage brands manage with increased material costs?
For Brands
Many luxury and high street British brands buy their fabric and produce their clothing within the EU. Since starting my own business, I’ve been very aware of the increased awareness around keeping production closer, it is still generally more expensive to produce your clothing within Britain, so many brands will ensure that production is kept within the EU rather than further afield. Consumers are becoming much more concerned with not wanting their clothing to have travelled more miles than they have. Being in the EU made this much easier than it would have been outside the EU. And of course it’s not just brands that work within the EU. With the devaluation of the pound, those brands that currently source fabrics and use manufacturers in Vietnam, Cambodia and China, where they pay in dollars, will have to pay more as a weaker pound will see their manufacturing costs soar.
For early stage designers
I have worked closely with fashion designers for the last two and a half years. Many of these are very early stage. I work with recent fashion graduates, early stage designer-makers who trade mainly around the London fashion markets, and also with a few more established London based brands that manufacture their own clothing, or work with small manufacturers and produce their clothing on a slightly larger scale.
Many of these designers really felt the effects of the 2008 financial crisis and it took a long time to recover and for people to start spending money again. On top of that, many really struggle to compete with the high street’s insanely low prices and fast fashion. A further increase in the cost of materials when margins are already being squeezed could be that step too far.
However, could something positive come from this situation? I wonder if, given the vote for Brexit and the campaigns to support our own economy and keep things local, could in fact help those businesses that sell locally designed and made products? Will customers be more willing to pay that little extra for items that are designed and made in this country? London, in particular, has a high volume of tourists, so perhaps while Brits tighten their belts for the next few months, spending by international customers may increase with better rates for their pound.
 
For fashion and design students
The European Regional Development Fund (ERDF) has granted millions of pounds in funding to London fashion schools, in the form of research funding and initiatives. The London College of Fashion receives significant financial benefits from the fund and uses the funding to sponsor initiatives which help graduates realize global opportunities. Withdrawing from the EU will see an end to this funding and may reduce those global opportunities substantially. Could this affect the number of students going to fashion college if the market is under more pressure to make a profit?
The Brexit may not be positive for fashion in the medium term, because creative industries like fashion thrive on multi-cultural viewpoints. Also anything that creates barriers for trade cannot be positive for retail. I certainly don’t have the answers, and I suspect there will be many more questions over the next few months / years.
Below are a few quotes from within the fashion industry;
New York times
“A weaker pound could “send manufacturing prices soaring.” Either the brand absorbs that, or it passes the cost on to consumers.”
The Wall Street Journal
“Brexit might create an opportunity for French and Italian fashion brands, which already make up half of the global luxury market, to gain further market share.”
Business of Fashion
“One major outcome of the Brexit is increased volatility in a market that’s already quite volatile, which could very well put a damper on British citizens’ inclination to shop, especially when it comes to luxury goods.”
Fashion united
“The UK currently benefits from favourable trade regulations with over 60 countries and in order to maintain its relationships, it will have to negotiate new agreements with both European and non-EU countries. Although those in favour of leaving the EU counter that Britain would likely be able to negotiate favourable trade agreements, similar to Norway and Switzerland, a number of countries have warned that there "will be consequences" in the case of a Brexit. UK fashion brands maybe have to pay increased taxes and fees to ship and sell their products abroad and foreign investors are likely to be deterred.”
Ann Summers’ chief executive
“I’m absolutely devastated by the decision and we’re already seeing the fall out in a matter of hours. Nobody knew what Brexit would look like, which is why Leave is the most dangerous thing for retailers.”
Debenhams chairman Ian Cheshire
“I’m disappointed but I’m not a believer in the ‘end of the world’ reaction. It is the less attractive option but we have to get on and deal with it.”
Analyst Tony Shiret
“The question is the extent to which this triggers a demand recession – I think there’s a good chance of that.”
Springboard’s insights director Diane Wehrle
“Consumers don’t like things that don’t feel secure and we’re in an unprecedented period when no one knows what’s going to happen.
The British Retail Consortium released a statement suggesting short term tactics to minimise the retail impact of Brexit.
“Retailers should be prepared for the possibility of significant swings, particularly in the exchange rate and consumer confidence.”

 

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