On the 23rd of June 2016, Brits voted to leave the EU, five years later, on the 1st of January 2021 this decision became official. This decision is one that would drastically change the UK and its fashion industry. Services within the UK have been adversely affected by the new laws which see a direct effect to both businesses and consumers. As fashion consultants, many of our clients have expressed concerns over the future so we set out to investigate the impact of Brexit on independent fashion brands and the fashion industry as a whole.
What does Brexit actually mean?
The UK has essentially broken up with the EU and now stands independently, rather than following one set of rules for the whole of the EU, UK businesses will need to comply with the regulations in each individual country.
The agreement between the EU and UK covers areas such as:
trade in goods and services;
a level playing field;
aviation and road transport;
UK participation in EU programmes;
New rules now apply for EU countries when doing business with the UK which include more safety checks, customs declarations and other administrative procedures at the border. If you are someone who sells across borders, you will will be affected by this.
How will it affect the fashion industry?
The British fashion scene is widely known, with London being one of the most iconic fashion capitals in the world. It has birthed some of the greatest designers, from Alexander McQueen and Stella McCartney. Brexit could most likely affect the highlight and crucial part of the British fashion calendar, London Fashion Week. The future of physical fashion shows is still in the air as covid still looms but going forward some shows may need to scale back as flying in and out of the UK is now more longwinded and expensive than when we were a part of the EU. Models could easily catch a last minute flight to London from Paris and vice versa but under the new rules, this includes having at least 6 months left on your passport, show a return or onward ticket, enough money for your stay and in some cases a work permit.
In the last year, retailing as a whole has completely changed, the effects of Covid-19 has seen some of the highstreet's biggest retailers such as Topshop close down, other stores have pivoted and focused heavily on their e-commerce stores. This may be a transition that many other businesses will adopt in the foreseeable future as tax rates and shipping increase, so will the cost of renting a bricks and mortar store. Based on export figures from 2018 it is estimated that switching to World Trade Organisation (WTO) rules would cost the fashion industry between £850 and £900million* (UK Fashion & Textile Association).
Inflation is imminent due to the increase in tax and importing/exporting prices, the costs of goods are due to increase therefore directly impacting retail prices.
What do I need to do as a fashion business owner?
Starting January 1, 2021, businesses selling to and from the UK will be subject to new regulations, customs, and duties because of the UK’s exit from the EU. Make sure your business complies with the new laws to avoid products getting delayed at customs, unhappy customers, and potential fines!
Here are a few things you need to consider if you are selling to the EU:
Apply for EORI: You should apply for an Economic Registration and Identification (EORI) number if you don’t have one already. This unique ID code is used to identify your business in customs documents. Get your EORI number by registering with HM Revenue and Customs (HMRC).
Register for VAT: You are not required to collect and remit VAT on orders shipping from the UK to the EU. You do however need to register If you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period or your business had a VAT taxable turnover of more than £85,000 over the last 12 months. If you are unsure how VAT rules impact your business, you may want to contact your accountant or a tax professional.
Review customs documentation: You may have to provide necessary customs documentation to avoid delays and make sure your customers get their orders on time. Customs documents may include your EORI number, VAT amount collected on shipment, VAT registration ID, and other details like harmonised system (HS) code, product description, country of origin, and value of each product in the shipment. Check with your shipping carriers before sending to understand what additional documents are required.
Update your website: As lead times increase it is important to set realistic shipping expectations, it may be worth updating your terms and conditions explaining that delivery times may be longer than expected - this can save you from getting disgruntled customers. You may also consider adjusting your price points as cost prices for goods made outside of the UK are likely to go up.
Some of the pros of Brexit are that now many designers will look more into producing locally, boosting the UK's economy long-term.
The shift in paradigm is one of the reasons why the fashion industry is one of the fastest evolving and it is vital as a business owner to be agile and able to pivot. It is important to stay up to date with the latest UK fashion information as new laws are constantly being legislated.
Written by Misi Chanel, 2021