Depending on how you voted, a few weeks on from the surprise, shock or euphoria that followed the UK’s decision to leave the EU, it is still really too early to say with any certainty what long term effect Brexit will ultimately have on the UK and the wider of global economy.
It does appear that the predications of impending doom for the UK economy, that both lead up to and followed the vote, have failed to materialise with a rebounding of the FTSE 100 index and GBP stabilising against both the US Dollar and the Euro, albeit at lower rates than before the referendum. It is clear markets and currencies will continue to fluctuate over the coming months as the aftershocks continue to hit a destabilise market. However, one thing has become very clear - that the effect of the referendum is not simply a UK problem with the effects already being felt across global markets. The UK footwear sector, with its international interdependencies, is far from immune from the resulting volatility.
From a positive perspective the lower value of
Sterling has the potential to assist British made goods including footwear exports. British footwear manufacturers are well placed to meet any increase in demand. As nothing will fundamentally change with trade agreements with the EU (for at least 2 years) and other key markets outside the EU, this should bring a degree of upside opportunity for British footwear makers and exporters.
However, as the Chinese say - to every Ying
there is a Yang and it is true that uncertainty is not the friend of business and the world certainly does not need a more cautious approach to buying. Nor will a further hit to retailer or consumer confidence help UK or global trade.
The devaluation of GBP against the US dollar
and the Euro will inevitably increase the cost of importing finished footwear, internationally sourced components and raw materials - including leather into the UK. This will put an upward pressure on prices (that the consumer will probably resist fearlessly by delaying purchase) and will more likely reduce margins for makers, importers and retailers alike as they fight to contain price increases. Any prolonged period of Sterling weakness will also push up the general cost of living in the UK further reducing disposable income and consumer spending. The actual cost for British companies doing business overseas e.g. travel, hotels, subsistence and trade shows is also set to rise due to the lower buying power of the pound Sterling.
12 • FOOTWEAR TODAY • SEPTEMBER 2016 Any new deal the UK will get with the EU is
still very much to be decided. However, it is clear no European country will benefit from the imposition of new customs tariffs or other non- fiscal barriers. Restricting tax free access for British made footwear and other goods into the EU would be very damaging for the UK. From a UK export perspective, of the fifteen biggest footwear export markets nine are in the EU; in 2015 UK footwear brands and suppliers exported over £1.3bn to the Eurozone. However increased reciprocal duties imposed by the UK would also increase prices and reduce sales of EU footwear brands and products to the British market that at £7.72bn in 2015; expected to rise to £8.89bn by 2020 (Euromonitor) is the biggest and most dynamic footwear consumer markets in Europe.
Encouragingly, the UK political machine has
acted quickly and, it seems, effectively. Mr Cameron “fell on his sword” making way for a swift and, relatively bloodless, change in government. The new guard under Mrs May has already made positive noises about reaching a new, hopefully, well considered and sustainable agreement with the EU. Certainly, the initial uncertainty and anger coming out of Brussels about imposing stringent penalties and restrictive future arrangements on the UK seems to be abating.
Initial discussions between Mrs May and
Mrs Merkel, most importantly, and Mr Hollande seem to point towards the possibility of finding a new, equitable, way forward. Even the vexed question of “free movement”, the key Brexit elephant in the room, seems now to be open to negotiation.
In the end, the UK leaving the EU may prove to
be a good thing for us all. Brexit may be a wake- up call to a very bureaucratically heavy EU. Britain has always been a reluctant EU member: a great supporter of the free trade zone, but, with the exception now of Scotland under the SNP, not a fan of closer Euro-government integrations. The EU as a whole may work better without the UK and will be able to move towards closer political and fiscal integration and control if that is what is desired. However, Europe, including the UK, will always remain fundamentally linked from a security perspective, historically, culturally and importantly for trade - these points must form the basis of our on-going future relationships.
It is clearly a time for cool heads and
calm hearts – as Mrs May says: “Britain needs to retain the closest possible ties with the EU.” UK access to a tariff and customs free European open market, the only one of its kind in the world, is something the UK nor the Eurozone should not throw away lightly.
Positively for the UK, from a more global
perspective, some key international trading partners including Australia, Canada, Japan and the USA have already come forward to express a desire to open bilateral free trade talks with the UK. However these agreements are going to take time to finalise. Mrs May has been keen to stress that the UK remains open for business in the
Developing new bilateral trading relations
across the world is going to be a challenge for the UK and doing this on our own after 40+ years will be interesting. Our hope has to be that in the end Brexit brings a new start for the whole of Europe and offers a new way forward for us all.
John Saunders, CEO British Footwear Association.
meantime and visits to China and India are being planned by Mr Hammond, the new UK Chancellor.
The BFA is already working with colleagues
from UK Fashion and Textile, British Allied Trades Association and other trade bodies to lobby Government on initiating talks on new free trade agreements and UKTI for grants and funding to support our sector at trade shows in new and emerging markets outside the EU.
As always we value the input of our members,
where they see future export opportunities around the world and the support they require will from the BFA and UK government to exploit future domestic and export opportunities. To help this process we are collecting direct input through a joint business survey with UKFT.
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