The Devil wears Brexit

18 October 2019

Author: Shannon Gawley
Practice Area: Commercial Law
Sector: Brexit, Retail

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With the UK facing the prospect of leaving the European Union on 31st October in the absence of a deal or an extension, the fashion world is preparing itself for the effects of what has been coined a fashion faux pas. For the non-Vogue readers amongst us, otherwise known as a no-deal Brexit.

Despite the UK and European Union having agreed a new Brexit deal this week, the runway has only just been set in what could be the final push to resolve the political uncertainties that have bedevilled the UK’s fashion industry for the last three years. Since the referendum held on 23rd June 2016, the UK fashion sector has made no secret of modelling its discomfort with the result. According to recent figures released by the British Fashion Council (BFC), a non-profit organisation devoted to supporting the industry, 90% of fashion designers said that they had voted to remain. The BFC further confirmed that the effects of a no-deal Brexit scenario could cost the fashion industry between a staggering £850 and £900 million in one single year. This estimation is based on export figures from 2018, which show that abiding by World Trade Organisation rules would drastically increase annual tariff costs for retailers and fashion designers alike.

So, what is the fashion forecast for the upcoming Brexit deadline and how would a no-deal affect the UK fashion industry? This weekend’s parliamentary vote will witness a fashion “face off” of deal or no deal, the outcome of which will have significant ramifications for the industry. However, even now, there is no certainty that the deal on the table will secure Parliament’s backing.

Whether you speak Prada or Primark, the impact of Brexit on the fashion world is universal to both shopaholics and sensible shoppers alike. The main areas of concern centre on what are commonly referred to as the three “Ts”: Tariffs, Talent and Trade. The status of each of these groups could dramatically change depending on the outcome of this weekend’s parliamentary session.

The Price Tag

With all due respect to Jessie J, sometimes it is hard to forget about the price tag.Particularly when there is the potential that the “cha-ching cha-ching” for the “b-bling b-bling” may increase. Following consultations with industry and consumer groups, the government recently issued a revision to the temporary tariff regime detailing an updated list of imports that would face tariffs in the event of a no-deal Brexit. The revision builds on the first temporary tariff regime, released in March ahead of the country's original deadline to leave the European Union. The main changes focused on clothing that would now be the subject of tariffs of up to 12 per cent. The items, the department said, were women's or girls' blouses, trousers or jackets made of cotton or wool. The implications of such costs could be that fluctuations are passed on to consumers. In fact, it is has been estimated that UK consumers could be hit by an 11.5% increase in prices for clothing made in Europe, if the UK leaves the European Union without a trade deal.

Britain’s (for)got Talent

The UK has a long history of supporting young, talented and aspiring designers including Alexander McQueen, Stella McCartney, Simone Rocha, Erdem Moralioglu, Molly Goddard and many more. In order to do this, the UK fashion industry heavily relies on two of the four pillars within the Single Market. Freedom of Movement and the Customs Union afford fashion businesses, designers and models the ability to prosper flexible and fluid supply chains. Designers, models, photographers, stylists, manufacturers and journalists, many of whom are freelance, rely on this flexibility to not only move freely but move product freely, at short notice, with low cost. According to the Fashion Roundtable Report, “Fashion is an entirely interconnected, international family, everything is knotted together.” With every twist that has occurred over the three-year saga since Brexit was announced, these knots have begun to loosen making the uncertainty around immigration and freedom of movement a turn off point for any leading international model or designing agency.

Relocation, relocation

As a fundamental driver of modern cultural and economic development, it is unsurprising that the creative industry contributed £32 billion to the UK economy last year. All around the country, and predominantly in cities, the impact that creativity has had on development is well marked. Logistics and fluid supply chains are vital to prosperity and growth of an industry that is built on talent, speed and ease of delivery. As noted by the Fashion Roundtable Report, the UK leads in innovative fashionable technology, with global brands such as Net-A-Porter, Amazon, Asos, Farfetch and Matches, all headquartered here. With the 11th-hour agreement just weeks away from the current Brexit deadline, this has left multiple businesses operating in the UK in a limbo of uncertainty, which has the potential to lead to relocation decisions.

For the fashion industry, a no-deal Brexit is considered a worst-case scenario that many had hoped to avoid. Whatever the outcome of the Parliament’s decision, the uncertainty has already affected businesses, who have had to contend with unanswerable questions over how to manage the import and export of products if and when Brexit occurs.

For more information, please contact Shannon Gawley, a solicitor in the commercial team at Carson McDowell at [email protected].

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