Prior to the pandemic, the UK's fashion industry was booming. Now, British retailers face new hurdles as Government failure continues to affect the industry's 'just in time' supply chains and international sales. The Government must act now to give the UK's largest private employment sector the support it deserves, writes John Longworth, Chairman of the Independent Business Network.

In the renegotiation of post-Brexit customs, the Government has allowed for the fashion industry to be bound by red tape. UK fashion brands insist they were prepared for the anticipated increase in processes and procedures, including customer border checks, increased documentation, and import VAT. However, they were not prepared for the higher hidden duties for exporting from the UK to Europe, placing a severe cost burden on retailers.

Although we expect this to be a hiccup for the fashion economy, the Government must work to ensure that cross border costs are mitigated in new international trade deals. This will alleviate the initial financial pressures felt by small and medium sized businesses and fundamentally, remove the potential for customer tax and duty charges.

Incoming trade deals offer the UK new possibilities for the fashion industry. Deals with countries such as Morocco have already assured that textile imports will be protected. Indeed, some non-preferential applied rates have been lower than expected due to changes in the UK's Most Favoured Nation tariff schedule.

Furthermore, the EU-UK Trade and Cooperation Agreement has allowed for the rollover of trade with a number of countries. This has secured the safety of Turkish imports, in allowing goods to travel through the EU to the UK by road without duty charges and removing VAT and import VAT charges on incoming Turkish goods. The ability to achieve tariff-free trade, beyond the EU, demonstrates the opportunities for post-Brexit trade – and presents a positive future for a global Britain.

Another area for concern is the Government decision to scrap the VAT Retail Export scheme and Extra Statutory Concession (ESC) on goods at duty-free and tax-free shops. While the decision may have sought to clamp down on the abuse of gift exemption from tax, the move has exacerbated the challenges faced by many in the industry.

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By eliminating the VAT Retail Export Scheme, the Government disincentivises inbound tourism and singles Britain out as the only country in Europe without a tax-free shopping scheme for international visitors. Without a 20 per cent VAT rebate, non-EU visitors will be deterred from shopping in the UK, particularly in London, and choose to divert their spending to rival European cities such as Milan or Paris.

According to the Office for Budget Responsibility, an independent commission set up by former Chancellor George Osborne, UK retailers risk losing a total income of 1.2 billion pounds from foreign visitors. In 2019 alone, tourists from outside the EU injected a total of £6 billion into the UK economy through the purchase of luxury goods and the use of British hotels and restaurants.

The Treasury's decision to implement this policy is fundamentally flawed. The belief that the move will recuperate £500 million annually is fatal in its failure to consider price elasticity. In an already challenging climate, the removal of the VAT Retail Export Scheme will ultimately be detrimental to both the retail and tourism sectors while simultaneously jeopardising London's position as the luxury capital of Europe.

The Government must revise its decision to remove the VAT Retail Export scheme and the ESC immediately, or risk damaging Britain's strongest asset. Rather than abandoning the scheme, the Government must digitalise the system to ensure greater efficiency, while ensuring Britain's competitive advantage over other European markets in the eyes of its international customers.

As we embrace a post-Brexit future, the Government must consider the needs of an industry so integral to the UK economy. We believe the British fashion industry should be handed the same tax relief granted to the film industry, which currently enjoys a cash rebate of up to 25 per cent of UK qualifying expenditure. Doing so will help to promote British-manufactured garments, particularly as retailers consider onshoring their textile manufacturing.

Furthermore, in the interim period before the two-year technical-based qualifications, T Levels, are implemented in 2023, the Government should include garment workers to the Shortage Occupation Visa List. This will allow for a window period in which the retail sector can shift their reliance on a 300,000-plus EU migrant workforce to homegrown talent.

The booming fashion economy will recover post-pandemic if the right action is taken. Deals with countries such as Turkey are good news for the industry and shine a light on future avenues for international tariff-free trade. We must seize the opportunities Brexit has provided and consolidate the industry's 'just in time' supply chains to ensure they are more resilient and better prepared for any future shocks to come. Above all, the Government must protect the British fashion sector and secure her place as the leader of luxury fashion for years to come.

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