LONDON, United Kingdom — More than three years on from the 2016 referendum, the UK's fashion industry looks set to receive another three-month Brexit reprieve.
On October 22, 2019, UK Parliament voted in favour of Prime Minister Boris Johnson’s Withdrawal Agreement Bill, which sought to turn his recently secured deal into law, but voted down the subsequent ‘programme motion’ which would have allowed Johnson to make good on his pledge for an October 31 Brexit.
The ball is now in the EU’s court for all 27 member states to unanimously grant a Brexit deadline extension until January 31, 2020, which is widely expected to happen.
Johnson's proposed bill is now in parliamentary limbo, with the government saying it has stepped up its no-deal preparations until the EU gives a response to the extension request, believed to be delivered later this week.
This means that, once again, the fashion industry is having to mitigate for many possible outcomes. From luxury brands to high-street retail chains, the UK’s fashion market is preparing as best it can amid widespread, prolonged uncertainty. But it is small businesses and emerging designers that are likely to struggle the most in navigating an ever-changing Brexit landscape.
Fashion Roundtable, a consultancy and lobby group that works with members of parliament to represent the interests of the industry, has said that, as of Tuesday, October 22, businesses should be taking into account the terms of Johnson’s withdrawal agreement bill.
The UK government has begun to roll out business and civil advice under its “Get Ready for Brexit” campaign, which offers short-form videos and online checklists on the premise that the UK could still exit the EU on October 31, 2019. According to the Department for Business, Energy & Industrial Strategy (BEIS), this is the largest communications campaign ever undertaken by the UK Government.
A spokesperson for BEIS said that “getting businesses Brexit-ready is our top priority,” citing its £108 million of funding for support and events across the country to help businesses meet with advisers. The Department also said that it has established a Business Finance Council, which “will identify and address any barriers faced by SMEs (small-medium enterprises) in securing the finance they need, particularly working capital and finance for investment.”
Brexit, any Brexit, be that soft, hard or no-deal, means more red tape, not less.
But concerns there isn’t enough time, or money, to fully prepare for Brexit echo throughout the fashion industry. “Having to work with a degree of uncertainty has been the biggest challenge to businesses, and particularly fashion businesses, who have a mostly European supply chain,” said Helen Brocklebank, chief executive of Walpole, an industry group representing the UK’s luxury industry.
“The worst possible scenario is that there’s going to be a lot of businesses that go out of business, because they don’t have enough cushion of finance to see them through this period if prices are suddenly going up or if they’re having to pay extra costs just for a new season,” said Emma Davidson, managing director of Denza, a UK-based international fashion and luxury recruitment company.
Below, BoF breaks down steps small businesses can take to best prepare for Brexit.
Tariffs & Supply Chain
As Tamara Cincik, founder and chief executive of Fashion Roundtable noted, “Brexit, any Brexit, be that soft, hard or no-deal, means more red tape, not less.” Fashion Roundtable suggests preparing to trade with the EU outside of the Customs Union and, if doing business with Northern Ireland, familiarising oneself with the customs checks proposed in Johnson's deal.
Businesses will need to get an EORI (Economic Operator Registration and Identification) number — an absolute must, as without one it will be impossible to move anything in or out of the EU. You only need to declare yourself as an exporter under a UK EORI, unless you are exporting to an EU branch of your own business.
UKFT, which has rolled out several resources and seminars on how fashion businesses can prepare for Brexit, has said that in the case of no deal, exporting to the EU will be like exporting to countries such as Japan or the US. Everything will be subjected to tariffs, whether it’s a product shipment to an EU-based retailer or a single parcel to a customer. On average, EU tariffs are 4 percent on yarn, 8 percent on fabric and 12 percent on clothing, however businesses will need to check this against specific tariff codes of each product being shipped out.
Businesses will need to pay close attention to their paperwork: correct tariff codes, EU import tariff rates and export declarations are just some of the hurdles businesses will face, along with additional documentation for products containing furs and exotic skins.
In the event of a no-deal Brexit, 140 fashion and textile products, including women’s trousers and women’s blouses, will attract an import duty.
Stripping the UK of its EU status will likely complicate the supply chains of many companies, which often rely on the ability to freely move product throughout Europe.
For UK-based brands that manufacture in the EU and ship internationally, “businesses are working with suppliers and factories to fulfil orders directly from the factories in Italy and Portugal, say, rather than bringing them back into the UK to fulfil,” said Walpole’s Brocklebank.
There will be new labelling requirements for all goods imported into the UK from the EU or European Economic Area (EEA) after Brexit.
According to advice from UKFT, all products need to be labelled with the company’s name and address, as well as the country of origin if this differs from its address. Although, there is an 18-month transition period before these requirements take full effect.
CE certification marking, which identifies a product conforms with health, safety and environmental protection standards within the EEA, will continue for a limited period until the UK government rolls out its own UKCA marking. This will not be recognised in the EU, which will still require CE marking on any of its imports from the UK.
Talent, Hiring & Employee Rights
When it comes to hiring, it is likely sourcing European talent will become more difficult and more costly. Sponsoring overseas talent is an expensive, bureaucratic process.
Denza’s Emma Davidson has already seen companies axing British talent from job candidate rosters in preparation for Brexit. The recruitment company is now expanding the pool of European schools it considers when scouting for top-tier talent in order to supply European clients with candidates.
This means that while many small businesses may not be able to hire international talent very easily, the domestic pool of talent is likely to be much bigger, especially among junior positions.
It’s going to be the youngest people who are the hardest hit.
“For very senior people, like heads of design, design directors, creative directors, I think there’s going to be the same swap of talent,” said Davidson. “It’s going to be the youngest people who are the hardest hit.”
Under the current system, non-EEA citizens counted as experienced workers needing a minimum annual salary of £30,000 for a skilled work visa or the “‘appropriate rate’ for the job you’re offered,” whichever is higher, according to the UK Government website. In a statement to BoF, the Home Office said “a new entrant — broadly, a recent graduate or those under 26 years of age — must be paid a minimum of £20,800 [per year].”
As far as employee rights go, there will be no legislative changes immediately after Brexit, even if there is no deal. This means that laws around working time regulations, holiday rights, parental leave rights and health and safety regulations will apply as they do now.
For businesses that have EU, EEA or Swiss citizens currently working for them in the UK, these employees will have to apply for settled status, which needs to be approved before June 2021.
Under Johnson’s proposed deal, UK citizens living in the EU and EU citizens living in the UK will keep their residency and social security rights. Anyone staying in the UK country for more than five years would be eligible for permanent residence. During the transition period, freedom of movement will continue, meaning that UK nationals will be able to work in the EU, and vice versa.
Samples & Shows
For many small businesses, presenting a collection at a major international fashion week is a vital way to gain traction in the industry; a moment where young and up-and-coming designers can pick up wholesale accounts and financial backers. Many UK-based designers will show in London, before taking their collection on the road to Paris, where final buying decisions are often made.
It is, as much as it can be, business as usual.
Transporting sample collections in and out of the country could become increasingly costly and complicated. In order for samples to be exempted from customs duties, they need to be in a state that means they can’t be resold: either cut up or stamped with the word ‘sample’ in indelible ink. Goods in pristine condition, like most fashion samples, would be considered an ‘example’ and subject to full duty, unless companies apply for an ATA Carnet, which provides tax and duty relief for temporary imports and exports.
Detachment from the European market also puts the UK’s position as a multi-cultural creative hub at risk. In a September interview, BFC Chief Executive Caroline Rush said Brexit concerns were not affecting attendance at London Fashion Week. “It is, as much as it can be, business as usual,” she said.
But, longer-term, London’s reputation as a global cultural capital is on the line. “We were particularly concerned in the context of Brexit that the idea of openness and global creative industries was not in any way diminished,” Rush said.