Could a Brexit be beneficial for UK apparel manufacturers?

London – The UK has entered into a period of uncertainty and volatility
following the outcome of the national EU referendum on June 23, which saw
the majority of the country vote in favour of leaving the European Union.
One of the first and immediate effects of the Brexit was the plummeting of
the value of the pound, which sank to a 31 year low on Friday. However, stressed that the
British economy is “fundamentally strong,” during a speech made on Monday,
his first public appearance since the Brexit, and assured the public their
economy will be pull through – but will take time and “have to adjust to
the new situation.” Although most of the UK fashion industry fears for the
negative fallout of a Brexit, a weaker pound, – could
the new situation be beneficial for British apparel manufacturers?

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What do local fashion and textile manufacturers stand to gain (or
lose) in a Brexit?

A weaker pound means that the majority of the British fashion brands which
currently outsource their production to countries such as Turkey, Italy,
Portugal, China and India will have to spend more on overseas production as
they pay in euros or dollars. These extra costs will likely to be passed to
the consumer, leading to product inflation. Trade barriers and new import
tariffs will have to be worked out, which are also likely to lead to extra
costs being passed down to the end consumer. However, a weaker pound would
also lead to lower rates which would create a good situation for investing
in local manufacturing. “While Brexit poses a number of challenges for
large-scale players, I think what you’ve hit on is an opportunity for
smaller home-grown businesses,” points out Anusha Couttigane, Senior UK
Analyst, at Kantar Retail to FashionUnited.

“In recent years, we’ve seen a rising interest in the “British Made” label
across the fashion sector. This is particularly true of upmarket segments,
for example, tailoring, but especially for smaller, artisanal labels.
Personally, I’ve spoken to a number of small fashion labels – both
up-and-coming and established – which expect to trade more on their
“British Made” credentials, not only because they have a commitment to and
favourable trade relationship with local mills and factories, but because
it is often more cost-effective for them to source locally than to pay the
duties and overheads on large international imports.”

“British Made” labels likely to trade more following Brexit

“While the manufacturing sector within the EU offers attractive labour
rates and a strong infrastructure for economies of scale, smaller
businesses are often put-off by the large minimum orders required by some
of these mass-production manufacturers,” she adds. “By contrast, smaller
UK-based manufacturers are often more likely to consider smaller orders. In
the light of this, it is possible that we could see a growth in fashion
trade among independents who rely more on domestic manufacturers than
continental ones.”

Over the years the appeal of British Made apparel and footwear has
continued to increase, with numerous countries overseas, including China
and Japan, valuing items bearing the Made in the UK label more than their
own home-made apparel. For smaller fashion brands, which manufacture their
apparel and footwear in the UK a weaker pound will likely help sell their
goods faster overseas. However, at the moment Britain sells 50 percent of
its exports to the European Union, which includes fashion, some wonder if
these countries will continue to purchases British-made fashion without the
tariff-free trade policy currently in place.

Brexit likely to hit cost of raw materials and oversea labour

In addition, the drop in the value of the pound is also likely to affect
the cost of raw materials, as many resources used by the UK fashion
industry, such as cotton, leather and wool are imported from overseas.
“Certainly the drop in the value of the pound that has happened will help
make our goods cheaper overseas and help increase exports – but what will
it do to the cost of raw materials, many of which are imported?” questions
Katie Hills, founder of Make it British and of trade show Meet the
Manufacturer.

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Another issue likely to affect UK fashion and textile manufacturers
following the Brexit is the restriction of free movement. “One of the
issues influencing the textile industry in wanting to remain [in the EU] is
the difficulty in finding skilled workers for the UK clothing industry from
without importing staff from countries in Eastern Europe, where these
skills are still taught and valued,” adds Hills. If restrictions are placed
on how and where workers from overseas can live and work in the UK then it
may become increasingly difficult for local fashion manufacturers to hire
the workers they need to produce their products.

The EU continues to play a “much bigger role in the supply chain”

“Bigger high street players are likely to find the Brexit development much
more challenging, especially as newcomers to the EU (Hungary, Romania,
Bulgaria) have provided important labour pools for large-scale fashion
production,” stresses Couttigane. “These are important resources and, more
widely speaking, the EU plays a much bigger role in the supply chain, from
fabric sourcing in Italy to assembly in central and Eastern Europe.” The EU
also provided a significant amount of funding for research and development,
which has benefitted UK fashion and textile manufacturers, who will not
miss out on the extra funding. “How will this affect the development of
innovation by these manufacturers now?” asks Hills.

Although there are a series of both pros and cons for UK manufacturers
following the Brexit, there is certainly room for smaller and medium sized
businesses to thrive and the potential positives seem to outweigh the
negatives – depending on which route producers chosen to take. “We are
likely to see these retailers: a) look to forge favourable ongoing
relationships with current suppliers, or b) seek bigger opportunities
elsewhere, for example with North Africa, China and India,” predicts
Couttigane. “While we may see some turning to British manufacturers to
supplement some collections, I don’t think this is likely to encapsulate
full ranges. For a start, this may well put too much pressure on UK
manufacturers.”

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UK manufacturers to benefit from offering smaller, faster turnaround
ranges following Brexit

“Secondly, although it might be quicker to use domestic suppliers, it may
not be the most cost-effective route for large retailers. However, what I
can see happening is a growing trend towards faster refreshment, with many
retailers introducing smaller collections more frequently throughout the
year, because newness remains a big driver in fashion retail. For these
smaller, quick turnaround ranges, UK manufacturers could be well-placed to
capture custom from the fall-out with suppliers,” concludes Couttigane.

Hills: “Either way, one thing is for sure – UK manufacturers are likely to
see a lot of instability and uncertainty over the next few months and
years.”

Photo: Make it British, The Leather Satchel Co., Facebook