The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — "We are leaving the European Union but we are not leaving Europe. And that is why we seek a new and equal partnership — between an independent, self-governing global Britain and our friends and allies in the EU," said British prime minster Theresa May, standing behind a lectern emblazoned with the slogan "A Global Britain," in London on Tuesday. "Not a partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of the membership as we leave," she continued.
Since becoming prime minister last July, May has remained tight-lipped about her plans in negotiating Britain’s exit from the European Union, using vague phrases like “Brexit means Brexit” and “red, white and blue Brexit.” This left political commentators, business leaders and European Union leaders to speculate about her government’s plans.
With Tuesday’s speech, May finally shed some light on her strategy. “We will continue to be reliable partners, willing allies and close friends. We want to buy your goods and services, sell you ours, trade with you as freely as possible and work with one another to make sure we are all safer, more secure and more prosperous through continuous friendship,” she said. The speech distilled her plan down to 12 points, resting on four underlying principles, providing much-needed clarity on the elements of the deal her government aims to negotiate, including leaving the single market, brokering a new customs agreement, controlling immigration and striking new trade deals with other nations.
But what this means for the fashion industry remains far from clear. BoF decodes May’s speech and evaluates the potential impact on fashion.
1. Britain will pursue a free trade agreement with the EU
“We will pursue a bold and ambitious free trade agreement with the European Union. This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets — and let European businesses do the same in Britain. But I want to be clear. What I am proposing cannot mean membership of the single market.
“That agreement may take in elements of current single market arrangements in certain areas — on the export of cars and lorries for example, or the freedom to provide financial services across national borders — as it makes no sense to start again from scratch, when Britain and the remaining member states have adhered to the same rules for so many years.”
By signalling that Britain will leave the European single market, May made clear her intent to negotiate a free trade agreement with the EU. While she specifically mentioned the automotive and financial services industries in her speech, there was no specific mention of fashion or textiles. The continued free trade of fabrics, textiles and finished garments between the UK and Europe will depend on the elements of the final free trade agreement. 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.
2. Britain will leave the Customs Union
“It is not just trade with the EU we should be interested in. A Global Britain must be free to strike trade agreements with countries from outside the European Union too. Because important though our trade with the EU is and will remain, it is clear that the UK needs to increase significantly its trade with the fastest growing export markets in the world.”
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, May said, and Britain had already commenced talks about establishing new trade deals with Australia, New Zealand and India. Most notably, May said American president-elect Donald Trump had signalled that Britain was not "at the back of the queue" for a trade deal with the US — as outgoing president Barack Obama had suggested before the Brexit vote — but rather at the front.
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, meaning the government will have to hammer out new customs agreements, while at the same time attempting to maintain tariff-free trade with Europe.
3. Britain will closely manage immigration from the EU and beyond
“We will always want immigration especially high-skilled immigration, we will always want immigration from Europe, and we will always welcome individual migrants as friends. But the message from the public before and during the referendum campaign was clear: Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver.”
“We want to guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals in other member states, as early as we can. I have told other EU leaders that we could give people the certainty they want straight away, and reach such a deal now. Many of them favour such an agreement — one or two others do not — but I want everyone to know that it remains an important priority for Britain — and for many other member states — to resolve this challenge as soon as possible.”
Controlling Britain’s borders is something for which May has campaigned long and hard, particularly during her time as Britain’s Home Secretary. This appears to mean all EU nationals working in the UK will require a work permit, with a preference towards “highly-skilled” workers and students that study subjects in the interests of Great Britain. According to a report in the Financial Times, senior officials say the Home Office is drawing up plans for a work permit scheme for EU workers alongside new automated security checks for EU visitors.
However, it remains unclear what this might mean for EU nationals already residing and working in the UK and Britons residing in the EU, a topic of great importance to the fashion industry as many European houses are staffed by British nationals and many British fashion companies employ European nationals. May is prepared to provide the same assurances to EU citizens as Britons are offered in Europe, and said she is ready to do so now, 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.
4. Britain could implement a new competitive tax structure
“If we were excluded from accessing the single market — we would be free to change the basis of Britain’s economic model. But for the EU, it would mean new barriers to trade with one of the biggest economies in the world. It would jeopardise investments in Britain by EU companies worth more than half a trillion pounds. It would mean a loss of access for European firms to the financial services of the City of London.”
In a thinly veiled threat, May said 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, echoing the comments of Britain’s chancellor Philip Hammond.
In an interview with German newspaper Die Welt, Hammond said Britain could be forced to change its economic model to regain competitiveness if it was denied access to the EU market. “You can be sure we will do whatever we have to do,” he said. “The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.”