With many businesses just about surviving the Covid pandemic, having to now contend with a no-deal Brexit may well be the straw that breaks the camel’s back
As the UK tries to hash out the final terms of its divorce from the European Union (EU), the thought of Prime Minister Boris Johnson walking away without a deal is a worrying one; UK textile and fashion firms should now be weighing up other markets to potentially trade with.
Brexit talks have reached a critical point and the UK fashion industry is clinging to the hope a deal will be clinched at the last minute. All break-ups are nasty. But with many businesses just about surviving the Covid pandemic, having to now contend with a no-deal Brexit may well be the straw that breaks the camel’s back.
Tariffs associated with trading under World Trade Organisation (WTO) rules mean it could cost almost GBP1bn more to trade with the EU in the event of a no-deal Brexit, according to calculations by the UK Fashion & Textile Association (UKFT).
Almost 75% of UK fashion and textile exports go to the EU so there are repercussions for EU fashion businesses too. According to the European Apparel and Textile Confederation, a no-deal Brexit could result in job losses of over 100,000 across the bloc. And, for clothing and footwear retailers reliant on EU supply, the WTO terms would mean increased scrutiny at ports and borders, which could lead to more paperwork and significant delays.
UK textile suppliers need to start looking beyond EU shores to other countries the UK has trade deals with. Currently, 29 of 70 existing deals the UK was automatically part of with the EU have been rolled over for 2021, including major garment manufacturing hubs such as Vietnam, Tunisia, Egypt, and Morocco. Earlier this year, a deal with Japan was signed which will allow significant new growth opportunities for high quality UK products like clothing.
Meanwhile, a deal was signed with Kenya last week. As one of the largest economies in East Africa, Kenya is an important trading partner for the UK, with its main exports including tea, coffee and spices, vegetables and flowers. Its apparel shipments to the UK were worth just US$1.88m (GBP1.4m) in 2019 according to Comtrade data.
And earlier this week the UK cut a deal with Mexico, one that will be beneficial for the textile industry. Talks with Australia and New Zealand are ongoing, while the White House said today (17 December) the US and UK are close to a deal on lowering tariffs. The US and EU have been locked in a long-running trade dispute over subsidies to Airbus, Boeing’s bitter European rival, and the US planemaker.
The EU imposed retaliatory tariffs on US imports totalling $4bn after the WTO ruled that the US had given illegal state aid to Boeing. The WTO had previously also ruled that EU governments – including the UK, France and Germany – had given illegal state aid to Airbus. As a result, UK goods such as woollen jumpers were hit with 25% tariffs levied by the US.
Should a bilateral trade deal come into force once the UK departs from the EU, it could mean an elimination of the 11.6% tariffs on goods exported from the UK to the US, and likewise an elimination of an 11.5% tariffs on apparel exports to the UK.
In other steps to ensure the continuity of trade when existing EU agreements no longer apply to the UK, the country will replace the EU’s Generalised Scheme of Preferences (GSP) with its own version, covering the same countries currently eligible for trade preferences. This includes key clothing suppliers such as Bangladesh, Ethiopia, Myanmar, Pakistan, and Sri Lanka.
The UK imported approximately GBP8bn (US$10.6bn) worth of textiles and apparel products from these GSP eligible countries last year – accounting for around 30% of all textile and apparel imports into the UK.
It’s important that UK businesses are proactive in seeking alternative trading opportunities in order to minimise disruption.