It has been a year since BREXIT, and concrete numbers about its impact on the textiles and apparel industry are just beginning to trickle in.
The latest trade data (January-September 2021) shows a dramatic drop of imports and exports of textile goods between the EU and UK, with significant losses for companies on both sides, according to EURATEX. The situation is likely to worsen, as the full customs regime between UK and EU has entered into force from 1 January 2022. Nevertheless, the UK continues to be the most important export market for EU textiles & clothing (T&C).
What early numbers indicate: Compared to the same period in 2020, between January and September the EU recorded a dramatic fall in imports (-44%, corresponding to almost €2 billion) and in exports (-22%, corresponding to €1.6 billion).
The most impacted EU countries in terms of exports are Italy, the Netherlands, Belgium and Germany. In terms of imports, the most impacted have been Germany, Ireland and France.
Clothing articles are facing the most severe drop in both imports and exports, corresponding to a total trade loss of more than €3.4 billion.
Why matters will worsen
- Full customs controls are being implemented from 1 January 2022.
- Therefore, export and import rules have become stricter: products should already have a valid declaration in place and have received customs clearance.
- Exports from Britain to the EU must now have supplier declarations and the commodities codes changed.
The state of affairs last year: In May 2021, the UK Fashion and Textile Association (UKFT) surveyed 138 businesses and revealed the following:
- 71% were relying on imports from the EU;
- 92% were experiencing increased freight costs;
- 83% were experiencing increased costs and bureaucracy for customs clearance;
- 53% were experiencing cancelled orders as a result of how the EU-UK agreement was being implemented;
- 41% had been hit by double duties.
The vast majority of the surveyed companies declared they were looking to pass the increased costs on to consumer in the next 6-12 months.
Cautious on developments: Earlier in February, the UKFT issued a statement on the breadth and depth of the UK fashion and textile manufacturing industry being recognised in the government’s recent report on Brexit. The report, The Benefits of Brexit: How the UK is taking advantage of leaving the EU, was released in January 202.
"While the deal has certainly not been without its challenges, it is encouraging to see that the value of the UK fashion and textile manufacturing sector has been recognised at the highest government level after being overlooked for many years."
However, the report provides no concrete numbers or measures. The words fashion and textiles, in fact, occur only once and twice respectively in the document.
The report said on page 59: “The UK Retail and Consumer Goods manufacturing sector has competitive advantage in UK-made niche and heritage products, sold globally, based on UK design, quality and provenance. These products are made in historical manufacturing clusters across the country which provide community and regional employment and are often sold under iconic British brands and by Royal Warrant Holders. Examples include Burberry; Northwest textiles; Derbyshire woollen wearing apparel; Northampton handmade men’s welted shoes, Harris Tweed; and Scottish cashmere and leather car seats for Aston Martin.
“Our “Made in the UK, Sold to the World” campaign, in addition to GREAT, are testament to the global appeal of UK manufactured goods. High-end and heritage products also have a particular appeal in Asia and the USA.
“The UK is also perceived, particularly in sub-sectors such as fashion and textiles, to be a leader in sustainable design and production. Outside of the EU Customs Union we will leverage this sustainable and “UK-made” competitive advantage for both domestic and overseas consumption.
“There is now an opportunity to build a domestic talent pipeline that is fit for purpose as jobs become more automated, digitised and green. There is also an opportunity to boost the consumer goods manufacturing sector with support for innovation, infrastructure and green processes.”
Looking at India
Since BREXIT, the UK can pursue its own trade deals. It has signed trade deals/agreements in principle with 69 countries and one with the EU. Most are "rollover" deals—copying the terms of deals the UK already had when it was an EU member, rather than creating new benefits. Trade talks with India began on 14 January 2022.
India, having pulled out of the Regional Comprehensive Economic Partnership (RCEP) which went into effect at the start of the year, is still looking for a major trade deal. Various industry bodies in India have long been urging the government to quickly ink a deal.
But Indian exporters might have to pull up their socks, sooner than later. The Competition and Markets Authority (CMA) in the UK has started a review of environmental claims in the UK fashion retail sector, investigating how products and services claiming to be ‘eco-friendly’ are being marketed, and whether consumers could be misled. It means UK companies will be stricter in their dealings. Indian companies will have to raise their standards and usher in more transparency.
Another cautionary note came in the UK-India Free Trade Agreement: The UK’s Strategic Approach by the Department for International Trade in January: "By looking at where sectoral production shifts are estimated to be greatest between the UK and India and where differences in the GHG (greenhouse gas) intensity of production lie, an indication as to where carbon leakage risks can be generated. Based on this, estimates suggest that following trade liberalisation, the risk of carbon leakage to India is greatest in ‘textiles and apparel’. UK producers are expected to see declining output whilst Indian producers see increasing output. Moreover, the emissions intensity of Indian production is significantly greater than the UK’s across both sectors. These factors combined explain why a carbon leakage risk is evident.
An appeal unheard, as yet: EURATEX has called on the European Union and the United Kingdom to effectively cooperate to address, solve and remove the issues in the EU-UK trade agreement that currently prevent smooth trade flows between the two sides of the Channel. "It is causing considerable losses for textile companies both in the EU as well as in the UK.
