Covid and Brexit collision decimates our multi-billion pound UK fashion industry

Fashion is fast and fleeting. That’s the point. Designers are lucky if they get a 10-year catwalk run. Now some are wondering if the industry itself will get another 10 years. The business is “living through hell,” says Vetements chief executive Guram Gvasalia

The immediate concern for designers and retailers, in a sector worth £35 billion in the UK, is Brexit. In an open letter to Boris Johnson last week, 451 industry leaders warned that work visa restrictions for designers and models and the additional tariffs and duties that now have to be paid when goods leave the UK for Europe threaten to “decimate” UK fashion. Paul Smith is among many designers who are considering shifting some production from Britain to the continent to avoid the extra charges. 

The Brexit crisis on its own would be bad enough but it comes as fashion grapples with the effects of Covid-19. Thanks to lockdown, catwalks are dark and no one knows when they’ll light up again. Boutiques, department stores, malls and factories have closed. Some big names will never reopen, among them Barneys New York.

The collapse in international travel, notably a lack of Chinese tourists in western capitals, cost the industry £10 billion last year and may do the same or worse this year, analysts estimate. And the glut of stock exposed by lockdown has revealed fashion’s dirty secret: it is based on overproduction, excessive resources and cheap labour.

“The situation is worse than Sars, 9/11 and the global financial crisis put together,” says John Hooks, former right-hand man to Giorgio Armani and Ralph Lauren, who is now a leading consultant to the biggest fashion brands. But the business is all about change and it’s racing to reset faster than at any time in its history. What will it look like in future? 

a woman wearing a costume: Model at Marques Almeida showAFP via Getty Images

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Model at Marques Almeida showAFP via Getty Images

Most designers are hoping that the Brexit issues will be solved in time for the easing of lockdown restrictions, when demand and manufacturing will, at long last, pick up. Patrick Grant, chief executive of ETautz, hopes the letter to the PM will make it easier for designers, models, stylists and manufacturing workers to obtain work Visas. 

What about the response to Covid? Like almost every sector, fashion is going to be more digital. When the pandemic forced stores to close, brands that had been slow to embrace online had no choice but to accelerate.“ We’re witnessing a paradigm shift in the way people buy luxury as consumers gravitate online,” says José Neves, founder of Farfetch.

a woman wearing a hat: Model at Molly Goddard showAFP via Getty Images

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Model at Molly Goddard showAFP via Getty Images

He’s feeling the benefit. Swiss luxury conglomerate Richemont, owner of Cartier and Montblanc, and Alibaba, the Chinese technology titan, have invested £820 million in Farfetch to help to grow sales in China. Farfetch’s market value has risen more than fourfold over the past year to reach almost £15 billion.

LVMH, the world’s largest luxury group, whose labels include Fendi, Dior and Loewe, is also ramping up its digital presence. It has named Louis Vuitton vice president Michael David its first “chief omnichannel”  (online and offline sales) director. He is expected to move all LVMH brands on to a single, global e-commerce and technology platform.

Neiman Marcus has hired Apple veteran Bob Kupbens to “develop digital products and capabilities that enhance store, online and omnichannel experiences”. Sally Singer, Vogue’s ex-digital creative director, has joined Amazon as head of fashion direction to bolster its efforts to lure big brands.

The shift online will mean some bricks and mortar stores will die, says Luca Solca, an analyst at Bernstein. But branded boutiques in big cities will survive and in many cases thrive, predicts Jonathan Siboni, of data intelligence firm Luxurynsight, because “luxury is not a commodity that you can get easily online. It’s about desire and emotion. Stores will always beat the centre of developing this link between consumer and brand”.

In spite of the growing condemnation of Beijing for human rights abuses, brands are looking to China for growth. Chinese consumers are forecast to account for nearly half of all luxury goods purchases by 2025 and are back shopping again now that the pandemic there is largely under control.  Swiss luxury watchmakers Hublot and Zenith are both pinning their hopes on the East. “We expect very strong growth of 30-50 per cent there,” says Hublot’s chief executive Ricardo Guadalupe.

Will all the structural changes in fashion’s grand maisons work? There are signs they might. Data from Bain shows online luxury purchases were worth $58billion in 2020, compared with $39billion in 2019. And consumers’ appetite for online retail shows no sign of stopping there. Anecdotal evidence suggests digital sales exceeded 50 per cent of all luxury goods sales over Christmas in many markets. LVMH’s Asian sales were up 21 per cent in the last quarter of last year. Much of Richemont’s fourth quarter sales bump of five percent last year came in the Asia Pacific. 

But there’s a snag. The exposure of overproduction is forcing the business to confront an issue too long swept under the red carpet: the environment. Almost all labels agree that they produce too many collections and stage too many costly, elaborate shows around the world. The race is on to embrace sustainability. Some of the big names are making a decent start at mending their wares and their ways. Kering, which owns Gucci and Saint Laurent, has a  Natural Climate Solutions Portfolio which aims to “protect and restore ecosystems that mitigate climate change”. 

At LVMH, Jonathan Anderson, creative director of Loewe, has begun making clothing out of recycled plastic bottles. Prada is using yarn spun from recycled ocean plastic to make its iconic nylon backpacks, ready-to-wear collections, accessories and shoes. Balenciaga and Burberry tout their fabrics’ green credentials. Organic and recycled fibres can now even be found in fast fashion retailers such as H&M.

Will it be enough to lure a new generation of eco-conscious consumers away from popular resellers such as Depop, Vestiaire and TheRealReal? It’s a worrisome question for big brands. The glut of unsold stock that has built up under lockdown begs another awkward issue. Overproduction has always meant most brands discount goods, but they’ve been forced to slash prices by up to 70 per cent over the past few months to clear the backlog. Persuading consumers to pay full price again may be hard, warns Hooks. He recalls how after the global financial crisis, many brands went on sale and customers got used to discounts and were not prepared to pay full price again.

For now, however, designers are daring to dream that after almost a year in increasingly threadbare sweatshirts, we’ll discover the joy of dressing up again once lockdown eases. “I don’t want to lounge any more,” Jonathan Anderson said before his recent online show. The Northern Irishman, based in Paris, working for a Spanish brand, reckons that by September Brexit woes will ease and normality — or what passes for it on planet fashion — will be back. For many, it can’t come a moment too soon.