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The Brexit decision is looming large over the UK and the EU, with a great deal of uncertainty around important factors such as trade agreements, EU funding, and the flow of people between Britain and the rest of Europe. The degree to which Brexit will benefit or harm UK industries such as fashion will depend on how these matters are decided over the coming years. However, businesses are already feeling the effects of the separation, both positive and negative.
The fashion industry contributes £28 billion to the British economy every year, and creates nearly 900,000 jobs. Such a large industry is important to the country, and stands to be strongly affected by Brexit. After the June vote, the pound fell dramatically and the global stock market dropped by $2 trillion. While the country’s GDP has risen by 0.7% in recent months, business confidence has taken a hit due to uncertainty, the pound is still weak, and growth in several areas has slowed.
There are both positive and negative implications of a lower pound. On the one hand, it is beneficial to tourism and foreign sales, as British goods and vacations become more affordable to people outside the country. Fashion and retail companies, among others, have seen solid sales since the decision. However, this is often offset by a higher cost of raw materials and other imports. Fashion manufacturers have many suppliers in the EU, and argue that it will be impossible to fulfill all their needs from within the country. The weaker pound therefore makes material costs higher, driving up the cost of manufacturing and causing many companies to raise their prices. This then minimizes the sales benefits of having a lower pound. It will become more difficult for British fashion brands to compete with other European ones because their material costs are now higher.
Another important concern is labor. It is still unknown how easy or difficult it will become for people to move between Britain and the rest of the EU. If the country separates itself completely, it will severely limit movement, making it considerably more difficult to fill and maintain positions in British organizations. Many fashion companies rely significantly on workers from elsewhere in Europe. It is possible that the country will negotiate an agreement that allows for some freedom of movement, but it is not yet known whether that will be the case.
British companies are already beginning to feel the effects of Brexit on their labor force even though immigration laws have yet to change. Employees from the EU are leaving or considering leaving, both in anticipation of not being allowed to work in the country and because a British salary suddenly buys a lot less in the rest of Europe. Many organizations are therefore already struggling to fill positions in retail, wholesale, and manufacturing.
Despite these looming challenges, growth in the GDP and the increased business from outside the country mean that not everything Brexit brings is negative. It remains to be seen whether sales offset the increased production costs, but there is potential for beneficial changes to the market. Departure from the EU may bring with it new tax incentives and deregulation that help fashion companies to operate and thrive. While there are challenges to overcome, there will also be opportunities to take advantage of.
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