Taking change in its stride? The fashion and footwear sector talks Brexit one year on
July 11, 2017
Last week we hosted a networking and discussion event with some senior players from the UK fashion and footwear sector, to discuss where we are now, a year after Brexit, and what the future looks like. The evening was led by John Hawksworth, PwC's chief economist in the UK, and Neil Sherlock, who is PwC's head of reputational strategy and former special adviser to the Deputy Prime Minister from 2012-13.
The evening began with a reprise of the current political and economic situation: the difficulties a minority government will face in negotiating a good Brexit deal, the continuing debate over the merits (and feasibility) of a soft rather than a hard Brexit, and specific ‘hot’ issues such as immigration and agreeing the arrangements for the Irish border. Neil Sherlock also talked about the shifts in the political landscape in continental Europe, in the wake of the landslide victory of the pro-EU Emmanuel Macron in France.
From an economic point of view, the UK initially proved more resilient than expected in the six months after the Brexit vote, partly because the global economy had strengthened and partly because of support from the Bank of England and the Chancellor.
But while UK employment levels are at historical highs, growth has slowed since the start of 2017. This is because higher inflation is eroding households’ spending power, and wage rises are not keeping pace. As a result, the amount that people have available for discretionary spending is under pressure, and consumer sentiment continues to decline, even though current levels are above the long–term average.
And what of the retail sector in all this? Judging by the discussion in the room, the sector isn’t yet concerned about potential Brexit-related labour shortages, but more concerned about the level of bad news and distraction from one important government business such as technology changes. As one participant put it, “Negative press coverage of Brexit isn’t helping – if people start feeling anxious then that will damage consumer spending.” And this is all the more important because the ‘squeezed middle’ of 45 to 64-year-olds is already the most pessimistic demographic group.
Despite the challenges facing the economy and the retail sector, one interesting take-out from the event was the degree of cautious confidence in the room. As one participant said, “The retail sector has always been good at adapting to the unexpected, whether that was the 2008 recession, changes in VAT or sudden currency movements. We’ll manage our way through Brexit too.” So while Brexit is undeniably a big short-term challenge (and issues like the National Living Wage and the level of the pound are on that list too), it was the medium- and long-range challenges that were really preoccupying the senior players at the event.
Technology is the clear priority here, especially in relation to the impact of automation on employment and spending power, and the risks of a much more polarised society, if automation leads to the elimination of many mid-range jobs. As one participant put it, “We need to look beyond the two to five year horizon of Brexit and invest in our digital capabilities. We need to transform our talent base and we need to take a long hard look at our store portfolios – where they are, what their role is, and who they’re serving.”
To sum up, the footwear and fashion executives we spoke to are taking Brexit in their stride, and focusing on doing their own business well. And that’s good advice, whichever sector you operate in. As one of the retailers put it, “In times like these, what companies need above all is a clear strategy and strong leadership.”
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