It would be fair to say that businesses in Somerset are now really starting to feel the effects of Brexit and our new trade deals with the EU and the rest of the world. From all the businesses I have spoken to so far the effects have ranged from bureaucratic nightmares with unnecessary paperwork and extra costs (see Brexit and Cheddar) to complete shutdowns of exports (see Brexit reality bites in Somerset, No balm for business and Iconic Somerset cider business hit by Johnson’s trade deal).
This time we are looking at the fashion industry. It is easy to underestimate the importance of this sector to the economy, so it is worth looking at the figures. The fashion industry’s total contribution to the UK economy is estimated to stand at over £37bn. It directly employs 816,000 people across a wide range of jobs. This makes it the 15th largest industry in the UK.
I interviewed Alice Temperley, MBE, the world-famous fashion designer, owner of Temperley London and more recently returning to her roots with World of Temperley in Ilminster, Somerset.
Alice is known for her elegant couture, which has graced so many celebrities and royalty that she was dubbed the English Ralph Lauren. She sells her collections throughout the world, but also has an off-the- peg collection, labelled ‘Somerset’ and featured in John Lewis, which makes her stunning designs accessible to a wider market.
Alice has often spoken publicly about her industry and the predicament that it finds itself in now that the UK has left the EU, and how the government has failed to understand and address the issues faced.
Indeed, minister for digital, culture, media and sport Oliver Dowden tried to deflect blame for the inadequacies of the trade deal negotiated by the government, saying:
“I trust you will also lend your star power to these efforts, and call on them [the EU] to make life easier for fashion professionals working in countries across the EU.”
But Alice’s response in The Times was clear and devastating:
“For the government to come back with this, they are hiding, they are cowards.”
This was after 450 leading fashion voices signed a letter to Dowden demanding action:
“The fashion and clothing industry is the largest component of the previously thriving UK creative industries, growing by 11 per cent annually, bringing significant employment and innovation to the UK. We jointly contribute more to UK GDP than the fishing, music, film and motor industries.
Yet we are disregarded in this deal and our concerns have been ignored in the current policy decisions.
This has significantly impacted our opportunity to build back better and grow our onshore manufacturing, digital innovation and sustainable design and technology in the UK, where we now, more than ever, have the real chance to show global leadership.
Everyone working in the European Union, our largest trading partner for imports and exports, will now be required to do an expensive job of paperwork for each of their member states and their products and equipment.
This is a step backwards and out of touch with the realities of the region. From traveling to the EU for business, to large-scale shoots and shows happening in the UK, red tape delays and costs are already affecting our industry, with work shifting to the EU, which is affecting our opportunities to travel and trade.”
I was keen to understand exactly which issues directly affected Alice and her business, and asked some detailed questions:
– How have post-Brexit tariffs been impacting the business? Are you still able to cope with exports to European stores?
“Brexit has seriously impacted the UK fashion industry for the following reasons:
1. There will be an increase in costs to wholesale when exporting to EU independent stores, as the requirements of applied Delivered Duty Paid (DDP) terms will force most UK producers to open a branch or acquire a VAT representative in one of the EU countries, to maintain the flow of deliveries and avoid losing out to competing EU-based brands. Luckily, we have already organised a logistics platform for this purpose in Italy to avoid additional delays to the delivery lead time.
2. Additional costs in paperwork. For example, certification of origin and UK customs’ operations. We have had to hire a dedicated broker to facilitate trans-shipments for pre-clearing and cut, make and trim (CMT: where an apparel factory takes designs and produces them to your specification) production in both inbound and outbound deliveries.
3. Production lead time will increase by several days, especially in the CMT model, as raw materials will not be free to move without proper certifications and customs’ control.
4. Offline retail: we will see a serious drop in buyers travelling internationally, as we are now also facing a ban on tax-free shopping and VAT reimbursement. This is not only limited to the EU but extended to visitors from all countries. On the other hand, many British consumers may well start to shop in Paris, where they’ll be able to get a VAT reimbursement of almost 20 per cent on their purchases … worth it for the cost of a Eurostar journey of only two and a half hours.”
– What kind of support are you hoping to see from policymakers and the industry alike?
“Fashion, hospitality and travel industries have been seriously damaged by Covid-19 restrictions globally. We do expect that businesses will apply for financial support and the 100 per cent government-guaranteed loans to cover stock and property costs. In spite of the booming stock exchange, the whole economy is short of funding, especially small and medium-sized enterprises (SMEs), which are often the companies that make up the actual social and economic fabric of the country. They are in need of cash to recover and to sustain their future growth. Tax-free shopping will need to be restored for EU and non-EU clients, who we need to come back to shopping in the UK.”
– Are you planning to make any changes at your end to combat these issues?
“We have had to make very significant cost savings throughout the company, including redundancies and limiting our development costs by reducing the number of seasonal collections. We are moving our production to UK-based mills as much as possible. Of course, the financial burden to cover the cash burned during this year has been mostly provided by our shareholders.”
Alice also showed me a letter from the British Fashion Council (BFC), in which they share Alice’s concerns. It states:
“Brexit anecdotes (these are very similar to your experiences with Temperley London):
Retail: Brexit makes UK retail less competitive when it comes to shipping to Europe. Big retailers have had no challenges with shipping due to the scale/number of orders.
We are seeing uncontrollable shipping delays and there was no way that we could have planned for the situation.
In London, the majority of us work with boutique suppliers based in Europe. We are learning on the job and there are undoubtedly and understandably going to be errors. The ‘rules of origin’ are particularly confusing.
Big companies like DHL and Fedex are also getting it wrong. Currently the shipping and freight costs are enormous – these companies are just trying to cover themselves. We as the designers are currently taking the hit. I expect this [cost] will be split in the future between consumer and designer business.
We haven’t even seen what the addition of the abolition of tax-free shopping will do, which will come into play later this year and next when we would expect tourists.
• The decision will leave us as the only country in Europe not to offer tax-free shopping, putting British businesses at a competitive disadvantage by severely damaging the international visitor and retail sectors in cities and towns across the country.
• The end of the scheme for tourists will make the UK a less attractive luxury shopping destination.
• The BFC along with individual businesses, industry groups and partners from across the UK has campaigned to convince the government to overturn what is such a damaging decision.
• In 2018, international tourists spent £22bn in the UK – £3.5bn registered as tax-free purchases.
Impact of tax-free shopping abolition on the UK and London:
• fewer international visits
• lower spending on retail and other goods and services
• tax-free spending moved to other EU countries – Paris likely to be the big winner
• loss of existing £3.5bn and expected £2.1bn from EU visitors
• additional unemployment costs – £3.5bn supports 70,000 retail jobs
• loss of 40,000 sustainable jobs in regional manufacturing hubs, shops and distribution centres as well as hospitality businesses
• international visitors make up 25 per cent of West End visitors but 50 per cent of the spending – West End spending is already down 80 per cent due to Covid-19 (down from £10bn to forecast £2bn)
• furlough and business rate holiday ending will add to costs
• businesses closing and investment moving out of the UK
• UK losing its soft power global asset.”
It is clear that Alice and the fashion industry as a whole are facing some devastating and unnecessary roadblocks due to the rushed-through trade deal. However, it’s the knock-on effect on other industries that will be harder to quantify.
If your business has been affected by Brexit and the new trade deal with the EU (either positive or negative), West Country Bylines would like to hear from you.