LONDON, United Kingdom — Britain is leaving the European Union. Today, Britain’s permanent representative to the EU Tim Barrow will personally deliver a letter from its government to European Council president Donald Tusk notifying him of Britain’s decision to trigger Article 50 of the Lisbon Treaty, ending more than four decades of membership and trade with the European Union.
Britain is now entering a prolonged period of uncertainty as prime minister Theresa May negotiates the terms of the country's departure from the EU in what is likely to be a tenuous and drawn-out process. Her government has two years to negotiate an exit deal, which may include leaving the single market, brokering a new customs agreement, tightening control on immigration and striking new trade deals. And while the interim uncertainty does not bode well for business, the long-term impact on the fashion industry remains far from clear.
A parliamentary report published last week found that non-financial industries like fashion could face "serious harm" if the UK fails to reach a comprehensive free trade agreement with the European Union. These industries, which also include telecoms, tourism and broadcasting, accounted for 32 percent of the UK’s exports in 2015 and were valued at £161.8 billion.
“These non-financial services are critical to the UK’s economy, fuelling growth, creating employment and supporting goods exports,” the European Union Committee wrote in a report published on March 22. “A ‘no deal’ scenario, or a deal which gave no special consideration to UK trade in non-financial services, would risk significant damage to these sectors.”
Within the report, the British Fashion Council (BFC) warned that losing EU protections against intellectual property could significantly impact the fashion industry given that all designs are protected “automatically, thereby saving on the costs of registering all designs across a portfolio (which can be substantial).” The BFC also argued it could lead to “effectively closing down London Fashion Week as a platform to promote British businesses,” meaning if designers or companies had to register and show their designs in the EU first to benefit from its intellectual property protections, this could make London Fashion Week an uncompetitive option.
Here, BoF outlines the four main areas that fashion industry professionals should watch as the negotiations begin:
1. A free trade agreement with the EU
Theresa May’s speech in early January outlined a 12-point plan that could see Britain pursue a free trade agreement with the EU, which could still allow for the free movement of fabrics, textiles and finished garments between the UK and Europe, something many in the fashion industry depend on.
Last year, the European Union accounted for 74 percent of UK exports, making it Britain’s biggest export market for textiles and apparel. Additionally, the value of UK apparel and textile exports was reported to be worth £9.1 billion in 2016, up from £8.5 billion in 2015. Still, much hinges on what Britain is able to negotiate, and many in the industry have already expressed concerns about the rising cost of raw materials imported from Europe in the wake of the pound’s dramatic decline since Britain voted to leave on June 23.
Certainly, this is something the European Union Committee is seeking to protect, arguing that it is extremely important that the UK sustains its status as a global hub for creative services.
“The Government will need to secure the most comprehensive FTA that has ever been agreed with the EU. Such an agreement should maintain and build on the UK’s many strengths in services trade. This will be a lengthy and complex process, but not impossible.”
2. Free movement of British and EU nationals
Maintaining the working rights of EU nationals is another issue that remains at the forefront of concerns outlined by Britain’s fashion industry, particularly as many of the skilled workers who form the backbone of design studios are European and international citizens. May’s speech outlined plans for all EU nationals working in the UK to hold a work permit, with a preference towards “highly-skilled” workers and students that study subjects in the interests of Great Britain.
However, it remains unclear what this might mean for EU nationals already residing and working in the UK and Britons residing in the EU. According to the Guardian, members of the European parliament have indicated that they will veto any Brexit deal that prevents EU citizens who move to the UK during the next two years, from having the same rights to live and work in Britain as those already residing in the country.
May has previously said she is prepared to provide the same assurances to EU citizens as Britons are offered in Europe, but this will require agreement from all 27 member states. Until then, EU citizens will be able to continue to move to work and live in the United Kingdom (and vice versa) as usual.
It is also an issue of great importance for the European Union Committee, who believes that the British government has under-estimated the reliance of the services sector on the free movement of people, stating in its report that: “There is a risk that the EU will take the view that comprehensive access to the Single Market in services is dependent upon some degree of movement of persons. The government, in forthcoming immigration legislation, must ensure that it retains sufficient room for manoeuvre to facilitate a negotiated agreement on this key issue.”
3. Trade with other countries outside of the EU
Trade deals with other countries outside the European Union will also be a focus and for the fashion industry in particular, negotiating deals with China, India, Vietnam and Bangladesh will be important, as they are all significant producers of both fashion components and finished garments. Having favourable access to the US market is also critical.
China, Brazil and the Gulf States have already expressed an interest in striking trade deals with Britain, and talks about establishing new trade deals with Australia, New Zealand and India have already commenced. Most notably, Britain’s relationship with the United States will remain key, indeed May has already invited US president Donald Trump for a formal state visit in the summer of 2017.
But in order for Britain to strike its own trade deals, it must leave the European Customs Union and extricate itself from the Common External Tariff and Common Commercial Policy first, meaning the government will have to hammer out new customs agreements, while at the same time attempting to maintain tariff-free trade with Europe. This agreement could be shaped much like the recently agreed Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. However the EU’s agreement with Canada took seven years to negotiate, and was almost scuppered by strong opposition from the Belgian regional parliament of Wallonia, highlighting the difficulties Britain will face securing agreement from the EU’s 27 other member states. Every single country — and in some cases regional parliaments — will need to approve such a deal.
4. A new competitive tax structure
Lastly, in a thinly veiled threat, May said in January if Britain was excluded from accessing Europe’s single market, it could implement a new competitive tax structure designed to attract and retain businesses operating in the UK.
This option has been has widely discussed in the media as the most contentious issue, though in recent weeks it appears that the UK has backed down considerably from its threat of walking away from the European Union without a Brexit deal. If negotiations were to break down over the two years, it is recognised by EU diplomats that this option would wreak ‘havoc’ on Britain’s status.
In the meanwhile, the BFC have said post-Brexit demands from the fashion industry include a review of immediate tax incentives for companies based in the UK — to help provide assurances to business owners, investors and potential employees — as well as government support for industry-wide strategies it may want to implement to help drive further growth.
Other considerations include speeding up decision-making around planning issues as a whole, investment in skills and training for the fashion industry, protecting intellectual property rights, providing incentives to use renewable energy and commitments around transport and infrastructure to ensure industry investments are spread across the country.