Brexit vs Fashion
On June 24 2016, Britain held a national referendum on whether to exit the European Union (EU). The results were shocking for some people, devastating for others, and welcome news for those who did not like Britain’s membership in the EU. Fifty-two percent of those who voted choose to leave the EU while 48% of them choose to remain. It was clear to everyone that the simple majority of Britons wanted to relinquish their membership in the EU. This exit would affect the entire British economy, much of Europe, and possibly, even the world. The global fashion industry, currently worth 3 trillion dollars, will see drastic changes in its structure and profitability especially in Britain.
One of the first fashion moguls to offer his opinion after the Britain voted to exit the EU was Katie Grand. Grand is the Editor-in-Chief of a bi-annual magazine called Love. She decried the new diminished stature of the UK in the global apparel market because of the EU exit. She even wrote that she did not feel any pride in being a British citizen since the exit vote. Other publications such as the New York Times also took note of the unraveling circumstances in the Britain and the EU. Leaving this economic block would affect the way the UK does business internally, with Europe, and with the rest of the world. Jonathan Anderson who is the Creative Director for Loewe observed that players in the fashion world would not escape these effects.
For example, leaving the EU means that Britain’s taxation and foreign currency exchange regime with change drastically. Previously, the EU had some input into the taxes Britain could impose locally and on international trade. This input was to make sure that EU countries do not pursue unfair trade practices. It now means that Britain may have to impose higher taxes on its people since without the EU, it has to become more economically self-sufficient than it was in the past. Additionally, Britain has to support itself when dealing with world affairs as opposed to the enhanced bargaining power it held on the world stage thanks to the strength of the EU. Higher taxes mean that manufacturing clothing items will become expensive in Britain. Sourcing for raw materials to produce fashion items will also become a tall order for many fashion houses because Britain’s negotiating power with source markets is not as good as it was before the exit vote.
The foreign exchange regime for Britain is also heading for difficult times. For instance, the value of the pound fell to a thirty-one-year low following the exit vote. It recovered slightly after that but it is not yet as strong, as it was before Britons chose to exit the EU. Vanessa Friedman who works for the New York Times notes that luxury UK brands such as Burberry could face soaring costs when it comes to manufacturing. In other words, it would take more pounds to buy the same unit of machinery and raw materials today than it took before the exit vote. Moreover, the amount of pounds received for every unit of clothing apparel sold today is less than that received before the exit vote. For example, Gucci loafers that sold for $613 on Net-a-Porter now sell for $420-580.
Many fashion analysts are now predicting dire times for the UK fashion industry. They see many fashion houses in the UK closing shop and moving to EU countries where there is still a big and free market for their wares. They also believe that Italian and French fashion companies are likely to take advantage of the situation by increasing their market share as their UK counterparts struggle to find a solid footing in this new world where Britain is not part of the EU.