Brexit has led to higher prices and increased bureaucracy for the clothing industry and companies are struggling to absorb the additional costs, a comprehensive industry survey has found.
The poll of 138 firms by the UK Fashion and Textile Association (UKFT) showed that British firms are experiencing shipping delays, higher freight costs and more bureaucracy since the new agreement came into force on Jan. 1, 2021.
UKFT chief executive Adam Mansell said the industry body had shared its findings with the government “to highlight the severe impact leaving the EU has had on our sector”. Almost three quarters of respondents reported higher costs due to new tariffs, while 44 percent had been affected by unexpected duties when re-exporting goods.
The survey questioned leading U.K. fashion brands, textile manufacturers, wholesalers, fashion agencies, garment manufacturers and retailers in May 2021. Nearly all – 98 percent – reported extra bureaucracy since January 1.
Changes to value-added tax (VAT), new customs duties, higher freight charges and border checks have all contributed to a rise in delivery times and export disruption at a time when the Covid-19 pandemic has battered the global economy. British tax officials estimate post-Brexit arrangements will add £7bn (€8.15bn-$9.7bn) of bureaucracy to the cost of doing business with the EU.
One unnamed U.K. menswear brand told UKFT its goods sold online now bear a 12 percent tariff for EU consumers. “We have lowered some costs but cannot absorb them all,” it said.
Another British outerwear maker said: “As we had already sold for the season we have had to absorb the cost (increases), which is having a dramatic impact on our business. The next season we will need to pass this on, but we have already encountered problems with our existing customers.”
Increased freight costs had impacted 92 percent of respondents, with 83 percent hit by more customs charges. Covid-19 restrictions and lockdowns had added to the Brexit impact.
“We have had lots of VAT costs in our EU supply chain, extra paperwork, product caught at customs for weeks,” a U.K. menswear brand said, adding that freight costs had increased by at least 30 percent. Others reported freight costs up by as much as 50 percent during the first months of 2021.
Returns from customers were also hitting firms - 44 percent reported rejected or returned orders from consumers where Brexit costs were the only issue, while 55 percent had canceled orders from wholesale customers and retailers for the same reason.
A U.K. knitwear brand cited an example of an EU customer ordering a £200 (€232-$275) jacket which incurred £160 in duties (€186-$220), while a jewellery maker said customers returning items for repair had received import bills.
As the U.K. is no longer part of the EU’s customs union and single market, VAT is now collected by each country and paid upfront by the buyer. However, if the European seller opts not to pay the tax, consumers must foot the bill. If the item is worth more than £135/€150 it becomes liable for import duty.
Some British businesses are thinking about setting up separate operations in the EU, investing in bonded warehouses to avoid paying “double duty” on re-exporting goods to the 27-nation bloc or halting EU trade altogether.
Several respondents also raised the issue of the end of freedom of movement for EU citizens. “We have always been able to bring in talent from around the EU. Our access to talent is now reduced which stifles creativity and diversity for our business,” one said.
However, some companies pointed to new opportunities offered by Brexit, particularly in light of “reshoring” and the appeal of UK-made goods to the domestic market, UKFT said. A British knitwear manufacturer and brand said it had already resulted in sales growth, adding that it expects to expand production and staff over the next few years.
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