As far as the clothing industry is concerned, nothing is going to be any easier in post-Brexit trade

As far as the clothing industry is concerned, nothing is going to be any easier in post-Brexit trade

Most of us thought 1 January 2021 would bring clarity for manufacturers around the world annually exporting $25bn of clothes to the UK – their fifth biggest customer. Britain had finally left the European Union (EU), and the two began to trade under the new EU-UK Trade and Cooperation Agreement (TCA). It sounded like nothing was going to change, says Mike Flanagan, who now believes almost every aspect of importing and exporting clothes in the UK is going to get a lot worse.

Boris Johnson's Conservative government boasted its new trade deal meant no change in how clothes would be traded between the UK and EU. It had adapted the EU's concessions on imports from developing countries into its own system, and negotiated replacements for the EU's special trade deals with about 60 other countries. For those like the US, China and Australia with no special EU deal? No change there either. 

Certainly as far as the clothing industry is concerned, nothing is going to be any easier – though an astonishing number of UK voters thought these new deals would mean new, lower prices.

There are, however, changes in the detail of how trade works. In four areas in particular:

  • Border controls. There are now physical borders between the UK and EU. Most currently have next to no facilities, and staff training is still going to take years. Before 31 December 2020, about 30% of UK apparel imports from Asia – and almost all imports from Turkey, the Middle East and Africa – arrived freely in Britain after clearing Customs at the EU border. World Trade Organization (WTO) data shows 69% of British clothes imports will now need border clearance they didn't require before.
  • Rules of origin. The rules determining whether a garment qualifies for lower import duty haven't changed much. But garments arriving in the UK claiming lower import duty than the WTO mandates must be accompanied by proof of where their components were made – which must be checked at those borders. That's 78% of Britain's clothes imports, says the WTO.
  • Exports. Britain's apparel exports have soared in the past 20 years: from $3.4bn in 2001 to $8.5bn in 2019, according to the WTO. 81% of them (again according to the WTO) to countries that didn't slap import duty on them. But they will now, unless the British exporter can demonstrate all their components were made in the UK, which virtually none are. So, 81% of UK clothing exports – either bought online or moving from UK retailers' distribution hubs to foreign branches – face not just documentation problems and further delays, but potential new taxes.
  • Chemical certification. The UK wasn't able to adapt the EU's REACH system that certified whether chemical ingredients conformed to safety standards. So it now has its own – and garments moving into the UK must be accompanied by paperwork certifying conformity. Which most don't have.
  • EU workers in the UK. EU citizens make up a substantial proportion of workers in many garment factories, especially around London, and in many clothes shops. 

How did all this change on 31 December 2020? We don't know.

Certainly, nothing has got better, and almost every aspect of importing and exporting clothes in the UK is going to get a lot worse. What remains to be seen is how many of the new rules imposed by Johnson's government will be enforced. 

We know it wants those pointless customs barriers at British borders – because they were entirely its idea. Even though the 26% of Britons who voted 'Leave' in 2016 said they just wanted to leave the EU, Johnson insisted on leaving the Single Market as well. With access to that Single Market, there would have been no need for them.

Of course we don't know how serious Johnson's government was in saying it wanted those pointless customs barriers, because it hasn't built them. Or trained the staff who'd man them or the truck drivers who'd be held up by them. In fact we're not sure whether they'd expect anyone to worry about the law anyway. It's not the UK, but the WTO, that requires the UK to treat all imports equally, and the WTO's courts don't really function right now. Would anyone notice if the UK broke a few WTO rules?

Clothes retailers would – because their suppliers would have to fill in all the expensive and pointless paperwork. The retailers wouldn't mind, of course: their suppliers always pay for that kind of thing. Customers wouldn't mind either: Britain's biggest retailer, Tesco, said it would make sure prices didn't go up.

Suppliers' profits would collapse of course. But, as the voters demanded in 2016, Britain would control who went bust. 

One thing we do know for certain: there won't be a single benefit from the new Brexit rules that British clothing retailers didn't have in the EU. 

Not even the propaganda for the government's 60 trade agreements pretended they gave the clothing industry any benefit that wasn't there already.

What we don't know is how long Johnson's government will survive. 

Only a few Conservative MPs really want this chaos and cost: most just didn't realise the mess they were voting for. There's an uneasy compromise between the majority of Conservative MPs and the isolationist nincompoops responsible for the mess. How long will Johnson's government cling on once the shortages, price rises and business failures become even clearer?

Already, the retailers who a week ago thought they'd get their suppliers to pay for all this are screaming at the government to get out of it – which means get back into the Single Market. And it's all got messier since the failed coup in the United States on 6 January.

British politicians – like Brexit party leader Nigel Farage – who were the strongest advocates of the mess about to engulf Britain's clothing industry were also the closest to Trump before the failed coup. And they're also in the tiny minority advocating minimal defences against Covid – a stance 80% of Britons find both terrifying and deranged. It's virtually certain Farage's admirers in the Conservative party will be brushed aside and ignored when he himself is.

Will that provoke the collapse of Johnson's deranged idea that Britain's future lies outside the Single Market? Did he ever have it? We just don't know.

About the author: Mike Flanagan is CEO of UK-based Clothesource, which monitors clothes production in EU factories for UK clients and gives the world's apparel buying community objective information on price competitiveness, trade regulations and apparel producers in over 100 countries. His retail insights come from being a director of the Charlbury Deli,which made more money in December 2020 than in any entire year before lockdown. Click here to contact him.