HOW BREXIT WILL IMPACT THE FASHION INDUSTRY IN 2017
In 2016, before the vote on the UK staying or leaving the EU was held, a survey was conducted by the British Fashion Council. It revealed that 90 percent of British fashion designers would vote to stay in the European Union. Well, those hopes were not fulfilled, as we know. So, let’s look at the possible consequences — what Brexit might mean for the fashion industry this year.
Brexit hit the stock market and weakened the British pound. And “the cost of a weaker pound impacts all retailers, so it will be passed on to consumers,” as Bruno Monteyne, senior analyst at Sanford Bernstein, told the Financial Times. “[Market volatility] is not good for the luxury goods companies and if we look at the trading of the shares of the luxury goods companies, probably this Brexit decision will increase the pressure of the market going down, probably the luxury goods companies’ valuation will falter in the short term amidst this volatility”, said Mario Ortelli, senior research analyst at Sanford Bernstein.
The worry about recent geopolitical tensions, polarisation and populism, has been generally spread in the industry, and actually Brexit is only a part of it. As Han Bekke, president of the International Apparel Federation (IAF), said in his opening speech at the China-Asia Textile Forum 2017 this March in Shanghai, “This could easily lead to protectionism and import duties and that will not only affect world exports of clothing (approx. $450 billion), but also the position of many companies and workers worldwide. The Trans-Pacific Partnership deal (TPP) was blown up by the US President, TTIP (EU-USA) is in the freezer, NAFTA (US-Canada-Mexico) might be renegotiated, CETA (EU-Canada) was signed but not without strong opposition at the end and we can only guess about the eventual consequences of Brexit. For sure this all leads to uncertainty for entrepreneurs, which is not a good business environment. Brands and retailers might start to change their sourcing in anticipation of higher import duties that may never come. In this way uncertainty will lead to waste of resources.”
Bekke sees two developments taking place in the near future. On the one hand, he sees an increase in accountability in the supply-chain process. As brands will be looking for a way to decrease their costs, more attention will be paid to the living and working conditions of workers in low-wage countries. On the other hand he predicts a shift from a focus on price to a focus on quality and sustainability, as well as on how quickly a product can be put on the market. This could make local manufacturing and reshoring based on new technology (robots, 3D) relevant again. IAF has started a working group on industry development in high-cost economies, combining good ideas from industry associations all over the world.
So, “What [Brexit] will mean for business is unknown. Whether it benefits business will depend on the terms of trade negotiated, access to high-skilled migration and other factors. To surmount this, it’s going to be absolutely crucial that business works with government,” says Alexander Betts, Professor of Forced Migration and International Affairs at University of Oxford. Let’s hope the challenges bring the industry to a new level of cool!
Information from the following sources was used in this blog article: the Fashion United news website, the Elle news portal, the Business of Fashion news portal.