Brexit: Cool heads and steady hands required
This is a post I recently wrote for City law firm Fox Williams. It is meant for the fashion sector , but the sentiments apply to other industries too. Let’s just calm down!
A couple of years ago I was privileged to interview Bernard Lewis, patriarch of the family that owns River Island, at a private industry dinner. This legendary and reclusive retailer, who was 90 earlier this year, is a man of few words. After the meal, one of the guests remarked to me admiringly: “Bernard never uses two words where one will do.” Perhaps because of this, his comments are always worth heeding.
My opening query to “Mr Bernard”, as he is known in the family firm, was about the true state of the trade. The received wisdom at that time was that the UK fashion retailing sector was in a perfect storm of unprecedented proportions, hit by a general economic malaise, post-2008 blues, rising raw materials costs, increasing fixed costs, inauspicious weather (as usual), the rise of ecommerce and so on.
Lewis, who built up the Lewis Trust’s extensive and successful retail and property empire from the single hand-knitting wool shop he opened on Holloway Road in the late 1940s, was dismissive of the contemporary doomsayers. “Does anyone really thing that conditions are worse now than they were in the depression of the 1930s?” he asked. “Or in the years after the Second World War when huge areas of London were bomb sites?”
It was in that troubled post-war period that Lewis, working with his three brothers, built up their unique retail network, starting with Lewis Separates, which were converted in the 1960s to Chelsea Girl and thence in the 1980s to River Island. His message at the dinner was straightforward and pragmatic: the prevailing conditions are the prevailing conditions and everyone just has to get on and work with them.
I have often recalled the cool head of Mr Bernard in the aftermath of the European Union referendum of June 23. The decision for the United Kingdom to exit the EU has been followed by a frankly unedifying maelstrom of speculation in the media. Every report of high street trading, currency movements, the number of visits by foreigners to Britain and so on has been seized by the opposing camps as “proof” that Brexit will mean Armageddon or the Promised Land for us.
The only thing that is certain at present is uncertainty, which even the most ardent Brexiteer must acknowledge is not helpful. At the time of writing, no date has been set for the commencement of negotiations to leave the EU and certainly no date has been mentioned for when Theresa May might invoke Article 50 to initiate the formal withdrawal.
So the industry must operate in the odd situation of knowing that change is coming but not knowing what that change may be. The UK may come out of the European Union but it will not be coming out of Europe. Trading relationships will endure and it seems fanciful to suggest that the UK will end up in some 19th century-style tariff war with its most important partners. Overall there will be plus points and minus points to the future arrangement, but it is impossible for anyone to predict with certainty where it will all end.
More worryingly, the In-Out debate is only the latest concern for fashion retail leaders. The sector is under immense pressure due to changes in shoppers’ habits. Fashion is clearly not as an important a purchase as it used to be for many people. We have seen this cycle before but this time it is clear that as a nation the UK is over-shopped. We have too many physical stores – that is obvious – and the rise of ecommerce only makes the size of some property estates look disproportionate. Yet ecommerce still only accounts for as little as 15%-20% of sales, so stores remain, by far, the main route to market. So there is a thorny problem to resolve.
Equally pressing is the need to restructure the supply chain. In an ideal world high-street retailers and brands would be making shorter runs nearer to the season and would have greater flexibility to repeat what is selling or to bring in something fresh and desirable. Easier said than done, of course, but the repeated sight of considerable amounts of unsold stock being marked down early in the season must prompt a rethink. The industry cannot keep blaming the weather. The fundamental system needs an overhaul, but the fragility about the sterling-dollar-euro exchange rates at present will not make that challenging prospect any easier or more attractive to tackle.
With these huge structural pressures to wrestle with, it is important too that brand owners and retailing leaders ensure that they do control what they can control. Essentials for successful international trading such as having their trade marks in order would be an obvious consideration. The circumstances in the industry finds itself in require agile minds and agile management. I fear that not everyone will be up to the challenge, but reflecting on the career achievements of the cool-headed Bernard Lewis might give reasons for optimism. You just have to do the best you can with whatever conditions are prevailing at the time.
Sign up for The Musgrave Manifesto
- The Place London Men’s
- Croots England. Made in Yorkshire. Seen at Pitti Uomo 91
- Christopher Raeburn for Save The Duck at Pitti Uomo 91
- Z Zegna at Pitti Uomo 91
- Johnstons of Elgin at Pitti Uomo 91
- PS by Paul Smith at Pitti Uomo 91
- Pitti Uomo hits 91 not out