Impact of Brexit on Apparel – Thematic Research
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Brexit is significantly impacting consumers and retailers operating in the UK and the Europe in a myriad of ways, including trade tariffs, the movement of goods, changes in the labor market, and general repercussions relating to consumer attitudes and buying behavior across the region. While these changes pose some initial hurdles in day-to-day business, in long run, Brexit will also provide fresh opportunities for retailers to consider and explore.
While the trade deal signed with the Europe in December 2020 will greatly lessen the impact of Britain’s exit from the single market, UK retailers and consumers will still experience changes in the retail landscape in 2021 and beyond. The last-minute deal avoided the prospect of tariffs on all imports and exports, which would have considerably pushed up prices of items that are sourced from abroad.
With tariff-free trade largely secured via the trade deal, items such as Romanian manufactured clothing will now remain available to UK consumers, and with only negligible price increases, if any at all. However, there are still a lot of unknowns around Brexit’s impact on the retail landscape, with a lot of moving parts. The biggest shift will be in the administration and paperwork, such as new customs and ‘proof of origins’ declarations. While the largest retailers should be able to ultimately absorb these new ways of operating relatively easily, it will prove a much more noticeable burden for smaller companies.
While Brexit has made the movement of goods through established supply chains more challenging, slow, complex, and costly for retailers in the region, UK-based retailers with multi-country supply chains will be more affected compared to retailers with simpler UK-specific supply chains. However, these changes in supply chains on the back of Brexit will ultimately lead to efficiency gains in the long run.
What are the main trends in Apparel emerging as a result of Brexit?
The main trends in apparel emerging as a result of Brexit are retails trends, consumer trends and regulatory trends.
Importing into the UK is now more expensive and takes longer due to custom duties, VAT and freight charges, and additional paperwork. Retailers supply chains face difficulties due to different and sometimes arbitrary standards of export from the UK to EU countries, especially when it comes to definitions of items made in the UK versus those processed in the country and re-exported. The VAT Retail Export Scheme, which allowed non-EU tourists shopping in-land to claim VAT rebate, has now ended and will likely discourage duty-free spending in the UK by international travelers. Luxury retailers like Selfridges and Burberry expect tourism sales to be diverted to other places in Europe if there is no resolution for the scheme.
Brexit will have a significant impact on duty-free spending as the new regulations bring a series of implications. The British government’s decision to scrap tax-free sales of goods including clothing in airports for travelers departing from the UK to non-EU countries will lead to reduced spending in airports. It is anticipated that the COVID-19 impact along with the end of tax-free shopping will lead airports to bear massive losses, putting the jobs of thousands of employees at risk. While there are negative consequences, the move will help protect the interest of several local and high street retailers which have fallen victim to tax-free goods being brought back to the UK and sold at a much lower price.
Following Brexit, the UK government ended tax-free sales in airports for product categories such as clothing for passengers travelling to non-EU countries. The decision to end tax-free sales of these categories was taken on the back of concerns that the tax-concession may not always be passed on to consumers in the airports. In addition, in many cases these tax-free products are brought back into the UK by residents, ultimately putting high street retailers at a disadvantage.
Which are few of the apparel companies that have adapted to the Brexit?
Asos, Gymshark, H&M, The John Lewis Partnership, JD Sports, NEXT and Nike are few of the apparel companies that have adapted to the Brexit. ASOS dominates the online fashion market for the younger population; it strengthened its lead during COVID-19.
There are also some opportunities in terms of M&A-related activities. For example, an international retailer can expand into the UK market by acquiring a UK-based retailer; the weak pound will certainly help attract potential acquirers. Furthermore, businesses in the UK can also acquire those in the EU in order to mitigate challenges in continuing operations across borders.
Market report scope
|Trends||Retails trends, consumer trends and regulatory trends|
|Key players||Asos, Gymshark, H&M, The John Lewis Partnership, JD Sports, NEXT and Nike|
- The outcome of Brexit will have a varied effect on different parts of the apparel market.
Reasons to Buy
- Learn how macroeconomic fluctuations will affect the apparel market in different Brexit scenarios, better preparing your business to cope with pressures in 2019 and 2020
- Delve into the hot issues around Brexit, including immigration, ports, borders and the Irish backstop, enabling you to view the bigger picture of how trade will be impacted by changes post-Brexit
- Read detailed analysis of apparel market, so you can alter sales mixes to minimize expected negative impact
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Which are few of the Apparel companies that have adapted to the Brexit?
Asos, Gymshark, H&M, The John Lewis Partnership, JD Sports, NEXT and Nike are few of the apparel companies that have adapted to the Brexit.
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