The future of British fashion

According to an analysis by EY, the UK is facing a recession which will last up to summer 2023. Fashion & luxury companies, especially those working in retail, are seeking better support from the Government to compete on a global scale and at the same time protect their employees during the inflation-driven crisis. Big entrepreneurial groups or fashion associations have modestly welcomed Rishi Sunak as the new UK Prime Minister.

Modestly because they are aware that he will have to face significant economic challenges and take on a key role during this crisis. «Walpole welcomes the appointment of the new Prime Minister, and with it the promise of the stability and certainty that are vital to the success of the UK luxury market», Helen Brocklebank, ceo of the UK official luxury industry body, stated. «Retailers are doing their part to support customers. However, these efforts are threatened by the 800 million pounds (about 930.2 million euros at yesterday’s exchange rate) bombshell of additional business rates that will hit retailers in April, a 10% increase that far exceeds sales growth over the past year», Helen Dickinson, ceo of British retail consortium, added. What has raised several concerns is the new about-face by Jeremy Hunt, the new finance Minister, on the issue of tax-free shopping.

The project ideated by former Minister Kwasi Kwarteng would have allowed tourists to shop tax-free within the UK. Basically, VAT-free shopping for foreign visitors with a 20% refund when leaving the country. The project had been revoked two years ago after Brexit. Then the fashion, retail, and luxury British sectors lobbied hard enough to reinstate it and spur business growth. Hunt's predecessor had pledged to allow tourists to once again get a refund of VAT paid on goods purchased on high streets and at airports in England, Scotland, and Wales. Tax-free shopping, according to Walpole's ceo, would have provided 1.2 billion pounds (1.39 billion euros) in direct retail sales.

«It would have been a significant boost for UK manufacturing, which is part of the wider ecosystem of the industry and supports employment across the country», she specified. Oliver Vernon-Harcourt, head of retail at Deloitte, explained to MFF: «Retailers had welcomed the news, particularly those in the luxury end of the market, given the value and volume of premium sales from tourists before Brexit. Since some of Britain's luxury shopping destinations are among the most visited tourist attractions, many retailers had hoped to see a return of revenues diverted to other markets». Maintaining the status quo, Jefferies analysts pointed out, including Flavio Cereda, will continue to penalize London, with evidence of some luxury brands making products available elsewhere in Europe instead of the Uk.

«Given the current political uncertainty, it is difficult to say whether this reversal can be reversed»they stated. So, what lies ahead for the UK fashion and luxury market? Davide Rossetti, Partner and Co-Head of Dla Piper's consumer goods, food, and retail sector in Italy, spoke on the subject: «The growth prospects for the fashion market in the UK are positive, with an expected increase in 2022 of about 8%. Social commerce will also continue to grow in the UK market, with an increase of 15% in the 2019-2022 period and a further surge of 9% in 2023. These sales will, of course, benefit the brands closest to Millennials and Gen Z».

On trends, the expert explained, the wardrobe for the workplace will increasingly shift toward business casual, especially in some markets, such as the US and the UK. «Consumers are indeed adapting to new work patterns, such as the office-home hybrid». There is no doubt that post-Covid-19 workplaces look and feel different than in the past, and remote work and flexible schedules are unlikely to disappear. «Collections will certainly take this new trend into account, and brands that remain anchored to old patterns will risk losing market positioning», he concluded. (All rights reserved)