With yet another Brexit deal deadline extended (this time, we’re told, it ‘must’ be agreed by this Sunday, 13 December), the time frame for businesses across the UK and the EU to adjust and prepare for a new trading regime has gotten even shorter.
Like many, I awoke in my North London bubble on 24 June 2016 to discover, to my surprise and horror, that life, as I knew it, was changed forever. As the owner of a UK swimwear brand and online store that relied entirely on importing my stock, the affects were immediate. The pound dropped 20% against the dollar and alongside it went 20% of my profits. Following a few weeks spent raging against Rupert Murdock, David Cameron and the 52% of people that had voted to inflict a self imposed economic and social disaster on themselves, I licked my wounds and got back to the drawing board. I had two choices. I could raise my prices (and continue to do so as the pound got weaker) or I could look to manufacture in the UK and shield myself from currency fluctuations. Initially I chose the latter but quickly discovered this wasn’t as easy as the ‘bring manufacturing home’ brigade had promised. For one thing, factories that specialized in clothing production were limited and, ironically, relied almost entirely on immigrant labour. Where once upon a time the UK had excelled in textile production, these skills were no longer taught to any significant degree and the majority of factories were now manned by seamstresses from Eastern Europe who would now be faced with barriers of entry to work and live in the UK. Another problem was cost – the one factory that could take on my order would charge me twice as much as the factory in the US that I currently used. Lead times were yet another issue. Running a small fashion business requires flexibility and agility. The lead times and terms that I was quoted made both impossible. So, I was left with no other choice but to continue to import, raise my prices and pass the cost on to my customers.
I knew this was just the beginning of my problems and, growing weary of the constant Brexit drama playing in the background of every decision I made, I decided in 2018 to leave London for a land where political drama wouldn’t dominate my every waking moment. (Only joking – I moved to the US, a country so divided and toxic that I’m almost nostalgic for jellied eels and Nigel Farage’s dog whistle tweets.) I sold my business and decamped to California where at least the sun is shining even if fires, deadly viruses and bizarre conspiracy theories have raged uncontrolled since my arrival. Despite no longer being affected directly by Brexit, I have many friends and former colleagues in the fashion industry back in London who are now still waiting to see if their own businesses will be decimated by the dual blow of Covid and Brexit.
So, what exactly will change on the 01 January and how quickly will the changes be felt? While the sheer volume of changes and disruptions that will occur as a result of Brexit are yet to unfold, I’ve identified issues that will affect small fashion businesses pretty much immediately and that fashion business owners and online retailers need to plan for ahead of time.
- The Pound
Since that fateful day in 2016 when the pound dropped 20%, it hasn’t recovered to anything like its pre referendum glory days. But how much further will it drop? Clearly it’s all speculative but experts predict a no deal Brexit will see the pound hit parity with the dollar and even lower against the Euro on 01 January. If you manufacture or import your clothing from outside the UK, this could be devastating.
- Taxes & Charges For European Customers
When I operated my clothing brand, 20% of my orders came from EU countries and many UK based fashion companies have similar breakdowns with some relying on EU based customers for as much as 50% of business. This will change on 01 January when customers are forced to pay additional charges and taxes. The Irish Times reported that customers in Ireland who purchase goods from UK-based websites could face a 40 per cent increase in prices when the items arrive in Ireland and the VAT and charges are added on. Using the example of clothes bought on a UK-based website for €167, it was estimated that they would end up costing an Irish consumer €236.32. In short, UK based websites will become altogether more expensive and unattractive shopping places for EU based customers.
- Consumer Rights Changes For European Customers
EU based consumers may also face substantial reductions in their rights. EU Consumer Protection law gives EU consumers strong protections when buying online (including the right to return items if they change their minds). Although these directives are currently implemented in UK law at the moment, it’s not clear how easy it will be for customers to enforce these rights in disputes with UK retailers. This may create a nervous customer, wary of whether or not they’ll be able to resolve any problems if they arise.
All items sent outside of the UK will now require a customs form to be completed. If you run an online clothing store like I did, 20% of orders (presuming you still have any EU customers to speak of) will require a customs form to be completed and attached to the parcel. UK-based online sellers of goods to consumers in EU countries will no longer be able to declare and pay VAT via their UK VAT return in countries where they are below the annual distance selling threshold (€35,000 a year per country for most EU nations). UK sellers will either have to register in each country where they sell and pay local VAT on VAT-able goods, or block customers in some or all EU countries.
All that administration and those forms that you’ll be completing? Well somebody needs to check these as well as for every other business in the UK importing and exporting goods. Workers have turned a 27 acre park in Kent into a car park in anticipation of the backlog of trucks crossing the channel. The flexibility and agility that I referred to as being cornerstones of running a fashion business will be tested here. Let’s hope your stock isn’t held up for too long in that queue of 7000 lorries. Lead times will need to be drastically extended less you want to be selling swimsuits in December and winter coats in July.
- Trade shows
Tipping over to Paris on the Eurostar for Interfiliere Paris, the annual swimwear and lingerie tradeshow was something I once took for granted. The same went for Premium Berlin and Texworld Paris. But from January, a trip across the water won’t be so simple for the British. Passports will require at least six months left on them and to be less than ten years old. Your European Health Insurance Card (EHIC) will be no longer be valid from January 1st meaning you will need health insurance before you travel. You won’t be able to swan through passport control and will instead need to use the, much longer, lines for international travellers. And don’t make too many phone calls – phone companies will now be able to charge roaming fees when you use your phone in the EU.
- Tax Free Shopping
The UK government has said that tax-free shopping, which allows tourists from outside the EU to claim back 20 per cent of the cost of luxury purchases, will end in January. Will the big spenders from China, Russia and the US choose to shop in London? Or in Paris, Dublin and Milan where they can continue to claim that 20% back? Personally, as much as I love a day out in Selfridges, I don’t love it so much that I’ll pay one fifth more than I would in any of the other great shopping cities of Europe.
Only time will tell the true damage that Brexit will bring to small businesses, especially in the wake of a Global pandemic that has infected and killed more citizens in Britain than any other nation in Europe. But for now, fashion brands and retailers need to take stock of what they know is coming and plan accordingly. I wish them luck. They’re going to need it.