Brexit: implications for the fashion and luxury brands industry
25 July 2016
As the dust settles after the vote for Brexit, the fashion industry and luxury brands sectors have been assessing the likely impact of the UK leaving the EU. Brexit will have profound implications for both parts of this industry: the fashion industry contributed £26bn to the UK's economy in 2015, and employed nearly 800,000 people in jobs ranging from the design team to the shop floors, whilst the luxury sector generated £32.2bn in sales, and was projected to employ around 158,000.
The EU creates a framework through which the UK and the 27 other Member States cooperate. At its core is the principle that the combined territory of those states forms a Single Market within which goods, services, capital and people can move freely, there is fair competition and consumers and workers are protected. The fundamental principle is that EU citizens must not be discriminated against on the grounds of their nationality, including in relation to their free movement around the EU.
One of the key unknowns when looking at the impact of a Brexit on restructuring and insolvency laws, is what sort of relationship the UK will have with the rest of the EU once its divorce has become final. Will the UK join the EEA? Will it become a member of EFTA but otherwise negotiate bilateral agreements with Member States? Or will it go it alone, negotiating a bespoke solution with each jurisdiction?
Potential future trading relationship with the EU and/or EU Member States
- The EU Single Market – the UK is currently a member of the EU Single Market which means that EU citizens can work and live anywhere in the EU and goods and services can be moved freely across borders without tariffs being charged. The UK could choose to stay in the EU Single Market or be granted access to it upon mutually agreed terms. However, in return for membership of the Single Market, the EU is highly likely to insist upon the UK complying with terms or principles that are problematic for the UK politically, in particular the "free movement of people" principle;
- Bilateral agreements – the UK may eventually conclude a series of bilateral trade agreements with different EU Member States and/or other countries with differing requirements, which are likely to focus on business and regulatory matters (such as imposition of tariffs or compliance with local regulatory requirements); or
- No relationship – if no deal is done with the EU, or EU Member States, then the UK will trade with them as a member of the WTO, in its own right. This would mean that the UK would have to meet the requirements of WTO membership (which it already does) but both sides will be free to change aspects of their relationship that they do not like or which promote their own interests, e.g. tariffs on imports. Current understanding is that the UK will have to confirm to the WTO that it will maintain the EU tariffs in the short term, but that these may change over time.
There is a spectrum of possibilities, and it is quite probable that the eventual trading relationship, whilst lying somewhere on this spectrum, will not precisely reflect any of these models but a “pick and mix” combination of elements from them.