It has been nearly two years since the UK notoriously voted to leave the European Union. With just one year to go until formal separation, 29 March 2019 seems imminent, yet the road to Brexit remains complicated. Still missing is a clear sense of where companies stand when it comes to tariffs and exporting their brands and products to other EU countries.
Last week the British Retail Consortium published a letter stating it “led calls to put the trade deals that the EU has negotiated with third countries, from which the UK benefits from zero or low rate tariffs on various imports, on a more secure footing for the transition phase. With the UK and EU working together, and goodwill from the third countries involved, there is every sign that this will be achieved too.”
How will goods move between the UK and EU countries
“Alongside these signals of good intent however, there are fundamental questions that remain unanswered. At the top of this list is how goods will continue to move uninterrupted across EU-UK borders after the transitional period ends. Securing tariff-free trade with the EU is only part of the equation for sustaining low prices and availability of goods for UK consumers.”
Can Brexit benefit fashion companies?
A report last year published by Textiles Intelligence states "one consequence of the UK's decision to exit the EU has been a fall in the value of sterling. This has made UK textile and clothing exports more competitive in terms of price. At the same time, many UK retailers are considering sourcing more of their requirements from UK suppliers as the fall in the value of sterling has made imports more expensive."
Five Brexit issues for retailers to consider
Price Waterhouse Coopers (PWC) outlined the top five issues for retailers to consider. These include: Strategy - how to position your business to capture opportunities arising from disruption; People - Quantify the labour market impact as we begin to lose access to workers from other parts of the EU; Financial - Consider the impact on existing finance positions, investment funding, liquidity positions and the stability of new funding sources; Supply Chain - Review your supply chain, particularly where heavily EU integrated. Understand how this will affect your customers, suppliers and stakeholders; and Legal - understand which parts of tax law would remain in force and which would move over time.
One remaining concern is not just about free movement of goods, but also the movement of people. How will the restrictions of EU nationals affect the companies that employ them in the UK? What about the availability of talent and skilled operatives? Many of the industry's skilled employees have come from other EU countries in recent years – especially those in Eastern Europe – and access to such resources could be curtailed if inward migration is restricted, notes Textiles Intelligence in its report Talking strategy: impact of Brexit on the UK fashion and textile industry – threats and opportunities.
The EU is the UK's largest trading partner for fashion export
Currently over 70 percent of UK clothing exports go to other countries in the EU. The worry for many brands is that this trade will be subject to tariffs, or in the worst case scenario, that these countries will go elsewhere for their product.
According to the BRC, “there will be opportunities for consumers from better trade deals and new markets, but the risk of not achieving a deal with the EU is enormous and its impact would be felt immediately by millions of us from the transition’s end.”
“The clock is ticking. Shopping will be one of the immediate litmus tests of the success of Brexit and what we pay for products in 2021 will depend on the deal negotiated in the next six months.”
Photo credit: London skyline, © User:Colin / Wikimedia Commons, via Wikimedia Commons. Article source: British Retail Consortium, Knitting Industry, PWC