What just happened?
The fashion and textiles industry have written an open letter to the Government highlighting concerns with the Brexit trade deal and Government policy.1
What does this mean?
The new rules governing the relationship between the EU and UK were implemented on 1 January 2021.2 Following this, Fashion Roundtable held an industry-wide meeting due to dissatisfaction with the Brexit trade deal and Government policy. The fashion and textiles industry, which contributes £35bn to UK GDP and employs almost 1m people, highlighted key concerns in an Open Letter sent to the Government on 2nd February 2021.3 It has been argued that the deal with the EU has left a ‘gaping hole’ where promised free movement for goods and services should be, resulting in greater costs for businesses.4
On a positive note, the Brexit deal included zero-tariff and zero-quota trade for luxury goods between the EU and Britain. However, new customs procedures and red tape are being imposed on goods travelling between the UK and EU.5 For example, EU consumers buying goods from UK-based fashion retailers are unexpectedly being charged for customs clearances and VAT worth 20 per cent or more of the cost of goods.6 Resultantly, many of the 52,000 smaller companies within the fashion industry are not being able to afford the professional help required to navigate new controls. As such, some have rendered it unprofitable to continue trading in Europe. This is problematic because 42 per cent of all British luxury export sales come from the EU.7
Another concern is access to talent and a skills shortage for UK fashion manufacturing. Brexit has ended free movement of people and the UK will be applying a points-based immigration system to EU citizens.8 Tamara Cincik, CEO of Fashion Roundtable, has said that the fashion manufacturing sector in the UK is facing a shortage of garment workers.9 Therefore, an end to free movement is particularly problematic for the fashion industry because stats from the Migration Observatory show that over one third of workers born in EU-8 countries were in retail and manufacturing jobs in 2019.10 As such the open letter has called for the Government to add garment workers to the Shortage Occupation Visa List to fill the vacancies in UK clothing factories.11
How does this impact the legal sector?
Law firms with expertise in the retail and fashion sectors will have seen an increase in demand from businesses trying to understand the implications of Brexit so that they can plan ahead. For example, legal assistance will be required in ensuring compliance with the new administrative burdens and mitigating any future risks regarding trade in goods, such as through good contract management,12 and employment.
Regarding the changes to trade in goods, commercial lawyers will have to keep up with trade talks and negotiations13 to help clients adapt as the impact of Brexit on the legal landscape is still relatively new. Considerations within trade law will be a key area, such as ‘rules of origin’. These rules help to determine the national source of a product and are used by governments to decide which tariffs and import duties to apply to products. For example, previously under the EU single market, fashion businesses exporting products from the UK to the EU had to apply a “made in Britain“ label and would then benefit from a zero rate of duty.14 The ‘zero-tariff’ inclusion in the free-trade deal only applies when goods are mostly originating from the UK and EU.15 This means that, post-Brexit, UK goods seeking to enter the EU will now have to demonstrate that they are “wholly obtained” in the UK.16 This must fulfil certain criteria and the application of this law will be important for businesses, some of whom may rethink using the UK as an entry point to the EU so as to reduce costs.17
Furthermore, the changes to immigration rules will prompt retailers to seek employment law advice from lawyers. As EU freedom of movement laws no longer apply, those from the EU whom come to work in the UK will require a visa (particularly a sponsored work visa). This will involve obtaining a sponsor licence from the Home Office and extra costs, which employers usually cover.18 Law firms can assist clients with carrying out these tasks and understanding the relevant requirements so as to reduce chances of disruption to businesses. However, this is both an administrative and costs burden, especially for those smaller fashion businesses. Therefore, in going forward from a business perspective, lawyers will be advising retailer clients to rethink their reliance on recruiting foreign nationals and how to best meet gaps in recruitment.19 However, this financial burden would be lessened if the government responds to the industry’s needs in adding garment workers to the Shortage Occupation Visa List as they face lower visa fees and a lower salary threshold for employers.20
Written by Sheelpa Maroo
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References:
[1] Open Letter (Fashion Roundtable, 02 February 2021) <https://static1.squarespace.com/static/5a1431a1e5dd5b754be2e0e9/t/601af56399f213278b58c948/1612379491392/Open+letter+from+Fashion+Roundtable.pdf > Accessed on 24th February 2021
[2] ‘When did the United Kingdom leave the European Union?’ (Government of Netherlands) < https://www.government.nl/topics/brexit/question-and-answer/when-will-the-united-kingdom-leave-the-european-union > Accessed on 24th February 2021
[3] Fashion industry fears for future over consequences of Brexit trade deal’ (Fashion Roundtable, 01 February 2021) < https://www.fashionroundtable.co.uk/news/press-release-open-letter-to-govt-fashion-industry-and-brexit > Accessed on 24th February 2021
[4] Ibid (n1)
[5]' ‘What the last-minute Brexit deal means for luxury’ (Vogue Business Team, 4th January 2021) < https://www.voguebusiness.com/companies/what-the-last-minute-brexit-deal-means-for-luxury > Accessed on 25th February 2021'
[6] Ben Chapman, ‘Retailers consider burning clothes stuck in the EU due to Brexit red tape and customs charges’ (The Independent, 22nd January 2021) < https://www.independent.co.uk/news/business/brexit-burning-clothes-customs-vat-eu-b1791421.html > Accessed on 25th February 2021
[7] Peter Foster, ‘UK fashion industry facing ‘decimation’ over Brexit trade deal’ (Financial Times, 1st February 2021) < https://www.ft.com/content/9275f5e1-8779-411c-ab65-5767f5e748d5 > Accessed on 24th February 2021
[8] Matthew Weaver and Hilary Osborne, ‘Brexit: what will change on 1 January for people in UK?’ (The Guardian, 13 December 2020) < https://www.theguardian.com/politics/2020/dec/13/brexit-what-change-1-january-2021-people-uk > Accessed on 24th February 2021
[9] George Arnett, ‘Brexit is here. What’s next for fashion?’ (Vogue Business, 31st January 2020) < https://www.voguebusiness.com/companies/brexit-is-here-what-next-for-fashion-luxury-eu-uk-tariffs > Accessed on 24th February 2021
[10] Hayley Biggs, ‘How will Brexit affect talent management and what can you do to cope?’ (Ocasta)<https://ocasta.com/blog/how-will-brexit-affect-talent-management-and-what-can-you-do-to-cope> Accessed on 24th February 2021
[11] Ibid (n1)
[12] Lucy Coffey and Stephen Sidkin, ‘The free trade deal with tthe EU is the equivalent of arthritis – you can still do most of what you did before, but it just takes a bit longer and is more painful!’ (Fox Williams, 30 December 2020) < https://www.foxwilliams.com/2020/12/30/the-free-trade-deal-with-the-eu-is-the-equivalent-of-arthritis-you-can-still-do-most-of-what-you-did-before-but-it-just-takes-a-bit-longer-and-is-more-painful/ > Accessed on 25th February 2021
[13] Baker McKenzie, ‘Brexit: Key Implications for the Consumer Goods & Retail Sector’ (Baker McKenzie, 2020) < https://www.bakermckenzie.com/-/media/files/insight/topics/brexit/cgr_brexit-updated.pdf > Accessed on 25th February 2021
[14] Stephen Sidkin, ‘A guide to Brexit for the UK fashion industry’, (Fox Williams, 1 September 2017) < https://www.foxwilliams.com/2017/09/01/a-guide-to-brexit-for-the-uk-fashion-industry/ > Accessed on 25th February 2021
[15] Chloe Rigby, ’What does the UK-EU post-Brexit trade deal mean in practice for ecommerce and multichannel retailers?’, (Internet Retailing, 30 December 2020) < https://internetretailing.net/operations-and-logistics/operations-and-logistics/what-does-the-uk-eu-post-brexit-trade-deal-mean-in-practice-for-ecommerce-and-multichannel-retailers--22496 > Accessed on 7th Mar
[16] Stephen Sidkin, ‘The EU / UK Trade Agreement: Two myths bused – Rules of Origin’, (Fox Williams, 7 Jan 2021) < https://www.foxwilliams.com/2021/01/07/rules-of-origin/ > Accessed on 26th February 2021
[17] Ibid (n14)
[18] ’Nichola Carter , How much does it cost to sponsor someone for a UK work visa?’, (Free Movement, 21st February 2020) < https://www.freemovement.org.uk/how-much-does-it-cost-to-sponsor-someone-for-a-uk-work-visa/ > Accessed on 25th February 2021
[19] John Smith and Fraser Vandal, ‘Are retailers ready for post-Brexit immigration rules?’ (Lexology, 1st December 2020) < https://www.lexology.com/library/detail.aspx?g=6ba12a57-3e28-45bd-b2dc-943e1296bc9e > Accessed on 24th February 2021
[20] ‘A guide to the Shortage Occupation List (SOL)’ (Migration Advisory Committee, 27th May 2020) < https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/887656/SOL_CfE_guide1.pdf > Accessed on 24th February 2021
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.