Brexit Aftermath: What Will It Mean for UK Fashion Retailers?
There has been a level of uncertainty forming over the UK economy since the UK decision to leave the EU, and the retail industry is anticipating what the business landscape and trading position will look like post-Brexit.
Surprisingly, consumers and businesses have been increasing their spending in the few months following the Referendum. Shoppers have spent strongly on restaurants, pubs and cinemas following Britain’s vote to leave the EU. As for fashion, sales also rose “markedly” in July, according to David McCorquodale, Head of Retail at KPMG.
Is this increase in consumer spending a “Brexit Boom” or will British retail be hit drastically?
As creative and successful as they can be, UK fashion retailers and brands will most likely not be spared by the Brexit effect. The weakened pound and currency volatility will mean higher import costs. This increase in import costs will have an impact on average household budgets and lead to a decrease in consumer spending.
Import duty arrangements will have to be renegotiated and could well result in higher duties on imports. Currently, all trade within the EU single market is free of import duties with Britain having arrangements with other countries offering preferential tariffs on imports, reminds Helen Dickinson, chief executive of the British Retail Consortium.
As many UK fashion labels rely on imported goods and manufacturing, and largely on European factories and skilled labor – 60 percent of British imports for the retail industry come from the EU – British brands could end up becoming more expensive for British customers.
Other post-Brexit issues at stake for the apparel industry include the possible increase in cross-border bureaucracy, the protection of intellectual property and design rights which are currently subject to EU trademarks and EU-wide design protection laws, and ensuring free movement of people to maintain the skilled EU workforce.
So how can retailers be better prepared for both rising costs and customers decrease in spending?
One way is investing education efforts by forming an increased UK skilled force for the fashion retail industry in order to lower reliance on other countries.
Another approach to maximize growth and profits for brands can come through the incorporation of 3D digital product solutions in the design and development stages. Going from traditional workflow to 3D decreases development and production costs by reducing physical samples up to 50% and with it the cost to make those samples (shipping brokerage and management costs, storage & archiving, disposable of redundancies, and labor costs).
While sourcing costs are expected to increase, improving product development process and reducing wastage become even more crucial if one wants to maintain stability and growth.
In sum, part of the brands’ habits has been to create and match collections to seasons. The same flexibility and thought process should be embraced in regards to political times and changing economic game rules.