After Brexit, which way for fashion?
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The impact of Brexit on the fashion industry is daunting, brain-scrambling and multi-levelled. The industry directly contributed £28bn to the UK’s economy in 2015 and employs 880,000 in roles from manufacturing to retail. For many British designers and stores, there will be an immediate hit on costs and margins. Once Brexit has been achieved, it could jeopardise design talent and retailers within the global marketplace forever.
During the campaign the British Fashion Council (BFC) reported that of the near-500 designers it polled, 90 per cent planned to vote for Remain. “I was surprised as anybody by the result of the referendum,” says Paul Smith. “Without question I am loyal to Europe. I’ve shown my men’s collection in Paris since 1976 and buy fabrics from Italy and elsewhere in Europe. We decided to buy currency before the polls opened, which has put us in a strong position.”
In the short term, some in the industry are happy. The fall in the pound is good news for retailers that have a large tourist pull, with Harrods reporting a strong start to its summer sale. There is some respite also for Burberry, which in May announced a £100m cost-cutting drive after a 10 per cent fall in profits. “Burberry should benefit from a weaker pound, given significant currency imbalances,” said Thomas Chauvet, luxury analyst at Citi.
Luca Solca, head of luxury goods at Exane BNP Paribas, calls this positive effect “margin tailwind”. But he sounded a note of caution: “Brexit, and the turmoil in financial markets, is likely to have negative repercussions,” he said, reflecting the bank’s revising down of 2016-17 growth estimates. “Consumers may pause before spending, and businesses may pause before committing to capital investments.”
Buyers and retailers are nervous about speaking openly — they want consumers to continue shopping as if nothing has happened. Off-the-record, a senior figure in a multi-brand luxury retailer talked of the concerns. “We woke last Friday in a much smaller world. The free movement of people is fundamental to the success of our business.”
Currency volatility is a huge worry. In this global marketplace, stores work with extremely complex business models, especially dotcom retailers, which buy and sell in multiple currencies. “Store buyers placing orders for brands that are paid for on delivery will be concerned about price. If this is the price now, what will it be in six months?” the retailer continued. “We’re still trying to work out what the margin impact is.”
Meanwhile, the only way many young British designers can afford to make their products is by having them manufactured abroad. This will now be more expensive.
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It’s assumed by many that the weak pound is good for those who manufacture within the UK. Not necessarily so, says Patrick Grant, who produces most of the clothing for his E Tautz label in the UK, including at his own factory in Blackburn, Lancashire.
“It’s such an overly simplistic view as to be offensive,” says Grant. “Most of our goods are made in the UK but almost all these goods have some component that starts outside the UK,” the designer explains. “The base cloth of our cotton textiles comes from Italy. That cost has gone up. Technical fabrics and zips come from Italy. The snaps and buttons come from Germany. We might sell a few more because the pound is weaker, but virtually every product will get more expensive to manufacture.”
Grant also takes issue with immigration, one of the key topics of the referendum. “In our own factory, two-thirds of the workers are eastern European, because we don’t have the skilled labour in this country,” he says. “We talk about apprenticeships but don’t have an education system that delivers young people ready to take it on. We’ve been trying to find apprentices in Blackburn for a year now: it’s been incredibly difficult.”
Many are now lobbying for the future of British fashion, particularly the free movement of people. “Immigration was obviously part of the political tool wielded by vote Leave,” says Caroline Rush, chief executive of the BFC. “I think there’s going to be a push from the industry that positive immigration, skilled workers and talent are really important to businesses in the UK.”
The BFC sits on the Creative Industries Council, a government-run forum. Rush says the fashion industry’s message aligns with those of other creative industries. More directly, some of the BFC’s funding comes from the European Regional Development Fund.
“We have had reassurances that the current grant is secure,” says Rush. “What will happen post-exit is a different matter. That will be an opportunity for lobbying government in terms of funding, and how our industries and different initiatives are supported.”
Other bodies are also in danger of losing funding. “It’s about job creation,” says Judith Tolley, manager of the Centre for Fashion Enterprise (CFE), which supports emerging brands with funding from the EU that’s matched with funds from the London College of Fashion. “We have worked with Erdem, Mary Katrantzou, Marques’Almeida, Craig Green. We help creative talents develop their brands into sustainable businesses that have longevity and create jobs.” The CFE has funding of £5.3m secure for a new three-and-a-half-year project supporting fashion and tech pioneers in the UK. And after that? “We really don’t know what’s going to happen.”
For UK fashion graduates, restriction on movement could be career-limiting. “My recent graduates have been getting job offers,” says Andrew Groves, course director of the BA in Fashion at the University of Westminster, one of the UK’s most respected schools. “I’ve been quite snobbish, saying, ‘You shouldn’t take that job, go to Paris, knock on doors, go to Givenchy, go to Dior. If they like you, you’re in.’ If we’re not in the EU, and it all gets nasty, I won’t be able to say that.”
British talent has flowed freely into European houses for decades, helping to define the look of the luxury era. “It’s the history of the past 20, 30 years. LVMH, Kering and all those companies will want to arrange visas for the very best talent,” he says, referring to the top creative directors such as John Galliano, Phoebe Philo, Stella McCartney and the late Alexander McQueen. “But it could make a difference to all the hundreds of graduates who staff the design studios.”
However, Groves does see certain positives emerging from Brexit. “At the end of the day I’m hopeful,” he said. “We are a creative industry and we always react to things in a creative manner, which is normally a positive manner, however it’s expressed.”
Paul Smith also has some calming words. “We’ve been in business a long time and have witnessed many different crises,” he said. “Being an independent company we’re flexible enough to weather the storm.”
This is echoed by Federico Marchetti, chief executive of Yoox Net-a-Porter Group. “We are less vulnerable to such external macroeconomic and political events,” he says. “Throughout our 15-year history, we’ve built a company under difficult circumstances: founding it during the dotcom bubble bursting, navigating the aftermath of 9/11 and the banking crash, to mention only a few significant episodes. What I have learnt is never to panic and to adapt quickly. The reaction is more important than the issue.”
Photographs: Getty Images