11 hours ago | By Emma Griffin
Experience the leading provider of consumer foresight.
Jul 01, 2016
By Petah Marian
London has been long considered one of the world’s fashion and financial capitals, as one of the world’s most creative and vibrant cities. But what will the Brexit vote mean globally for “Brand Britain”?
While facing reputational damage in Europe following the UK’s vote to exit the European Union, London’s perception as a cosmopolitan, multicultural hub has been dealt a second blow as the spate of racially motivated hate crimes make headlines around the world.
London has garnered its reputation as a cool city because it is a place where worlds constantly collide – a city where the sari silk stores of Brick Lane rub up against the Savile Row-suited bankers of Bishopsgate. It is exciting because in a city of 8.5 million people, three million are foreign born, bringing together a diverse range of world views, to create new experiences and amazing products. It is where history co-exists with some of the most innovative tech start-ups, while Central Saint Martins is the starting point for many of the world’s best designers.
For brands trading on notions of Britishness – from Savile Row to Topshop, this once solid association is now less of a good bet.
Speaking at the FashionTech conference in Berlin this week, the European Parliament’s Dr Christian Ehler said that the decision is a “huge loss of the EU”, because “The UK, and in particular London is one of the most vibrant places in terms of creativity. We often tell other countries to look to London and the UK for inspiration. This is no doubt going to have an impact on the ways in which the UK trades.”
Indeed, the decisions of the last week could have a brand limiting impact, with the vote representing an “isolationist” or “regressive” move that would signal Britain’s withdrawal from the global stage, marking it out as less modern and innovative than previously perceived.
Luxury and export
The British luxury sector contributes £32m to the UK economy, accounting for 2.2% of the country’s GDP. Of that, 78% of production is destined for export, worth around £35.5m, according to luxury trade body Walpole.
What makes a product quintessentially British? For many luxury labels, like Burberry, Mulberry and Barbour, their “Britishness” is a key element of their brand, regardless of whether their products are actually produced in the UK.
Britishness is a somewhat intangible notion – but for consumers buying into UK brands, there is a perception of creativity, innovation, quality, history and luxury. But it’s not just about the perceived product values, when people buy into British product, it is a reflection on how they feel towards the country.
For brands operating on this basis, it will be important that they continue to consider what it means to be a “British Heritage Brand” and given the uncertain road ahead, whether this will remain a positive product attribute.
But it’s not just the perception of London that might come under threat through Brexit. The ways in which the UK trades could change seriously if London loses its financial crown after the Brexit vote, if the UK lose its access to the European market. By using a UK license as a European passport, foreign financial firms can offer their financial services throughout the European Economic Area. If the UK cannot secure a “Norway” deal and stay within the internal market, the UK will lose these passporting rights.
In the New York Times, the percentage of one financial institution’s staff that could be required to move ranged from 10% to 40% over the next five to 10 years.
“Multiply that throughout the industry and it’s tens of thousands of people and their families,” an executive in charge of relocation said. “And bear in mind that most of these people are millionaires.”
With this move, a number of highly paid employees and stores, restaurants, and cultural spaces that serve them will suffer.
Middle Eastern travellers accounted for 42% of total UK sales, growing 7% on last year, according to data from Global Blue.
For instance, the Middle Eastern consumer accounts for 30% of non-EU spend at Westfield London and 23% of non-EU spend at Westfield’s luxury quarter, The Village.
If attacks on UK Muslims continue, one can only expect that this will have an impact on how safe Middle Eastern tourists feel in London, and whether they would want to come to the UK.
But on the other hand, the devaluation of the pound sterling means that visiting and spending in the UK has never been cheaper for travellers.
Tech and Talent
While the UK is a burgeoning hub for technology start-ups, particularly in the fashion space. Brexit will mean that venture capitalists, who don’t like uncertainty, won’t want to invest.
And tighter immigration rules will hamper the sector’s growth, with half the founders of London’s top tech start-ups come from outside Britain.
Incorporation in the UK will also become less attractive as there will be less available capital, and access to the rest of Europe won’t be as simple.
One-third of recent European investments by venture capitalists were made in the UK. In the first quarter, UK companies took in $1.3bn in funding, while the rest of Europe took $2.2bn.
This will have an impact on retailers and businesses in the UK looking to work with start-ups to innovate.
So it’s definitely an interesting time for Britain and retail.
Like this? Follow Petah on Twitter here.
For more, subscribers can look out for the in-depth Brexit retail report on the main WGSN site.
For fashion news and analysis join WGSN.
Know what’s next. Become a WGSN member today to benefit from our daily trend intelligence, retail analytics, consumer insights and bespoke consultancy services.