The historic referendum on Thursday that determined whether the United Kingdom should stay or exit the EU (hence the Brexit name) was a clear signal of a changing tide. It has left global markets in a free fall, analysts cautioning against any drastic sell-offs and politicians wondering if the sentiment shared in England is one that will take root globally.
Though the shift won’t happen for another two years, what Brexit means immediately for the United Kingdom isn’t clear yet, so what it means for fashion brands and retailers is an even murkier future to decipher.
Stateside: Retailers, Brands Watch for F/X Pressures
Analysts stateside have said that the biggest impact right now is the negative effect Brexit will have on consumer confidence and spending in retail. (And considering the stagnant year shoppers are already having, it’s unwelcome news.)
Oliver Chen, analyst at Cowen & Co., said he expected lower- and middle-market stores to weather the uncertainty better than others. Higher-tiered brands and stores, and retailers dependent on tourism, should see a bit more of an impact due to currency changes and market instability.
“We have concerns that the U.K.’s vote to leave the EU could potentially lead to a prolonged period of uncertainty that would most likely dampen consumer demand in the U.K., as well as carry into continental Europe,” wrote Chen in a note to investors.
Citi Group’s Kate McShane released a note saying she wasn’t going to change her ratings, but said revenue could be challenged thanks to exchange rates — and Brexit could have a chilling effect on the mergers and acquisitions market.
“Now that Britain is severing the relationship [which opened boarders and trading rules], that reverses the trend [of open markets] and could mean the cost increases to doing business in Europe,” said Steve Lamar, American Apparel and Footwear Association EVP.
The Future of TTIP
Another impact? Brexit puts the brakes on the Transatlantic Trade and Investment Partnership (TTIP), which was in negotiations between the European Union and the U.S.
The deal would have more than likely aided in reducing tariffs on footwear imports from Italy, Spain and Portugal. According to the Footwear Distributors and Retailers of America, the U.S. paid $196.6 million on a $2.06 billion footwear import bill from the European Union in 2015.
While largely TTIP would have most likely affected a smaller number of brands, especially in the luxury category, it would have been a further opening of markets for footwear, according to Matt Priest, president of the Footwear Distributors and Retailers of America.
“I think the immediate impact is going to be that is really going to put a wrench into the TTIP progress,” said Priest. “Ultimately, I think it sort of has done in any kind of conclusion in negotiations by the end of the Obama administration.”
Priest said he expected much attention on the deal from the EU would likely shift over to negotiating the terms of Britain’s exit. While there may be many questions about the future of the EU, Priest said that fundamentally commerce will win eventually and that the U.S.’s strong relationship with the U.K. isn’t going anywhere.
“From a fashion perspective, I think goods will still flow, and I think there will be a negligible impact on the movement of talent and services,” he said. “Londoners will not stop wanting luxury brands [from Europe].”
For British Designers: What Now?
In the days leading up to the vote, fashion industry insiders were taking to social media to support the Remain movement. Heavyweights such as Vivienne Westwood, Alexa Chung, Victoria Beckham and Sophia Webster weighed in on staying in the EU.
Overwhelmingly, the move to exit the European Union was one that was unsupported by the fashion community, according to the British Fashion Council. The council ran an independent survey of designers and found that out of 290 designers surveyed, 90 percent said they wanted to stay in the EU and 4.3 percent voted to leave. Meanwhile, 2.4 percent were undecided, and 2.8 percent said that they would not vote
“We now have a role to play in keeping government updated on our industry’s priorities and keeping the designer community updated on any likely impact to business as our country prepares to leave the EU over the coming years,” said Caroline Rush, CEO and CBE of the British Fashion Council.