CEO Letter | Prepare for the worst, hope for the best: British luxury and a no-deal Brexit
According to Boris Johnson’s great idol, Pericles, “What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others”. As Prime Minister, choosing a cabinet implacably dedicated to delivering Brexit by 31st October “by any means necessary”, coupled with his appointment of Dominic Cummings and Michael Gove as masterminds of no-deal planning, may beg the question of what it is, precisely, he wants to weave into the life of the United Kingdom. His promised “sunlit meadows beyond” 31st October will need to materialise pretty jolly quickly if his legacy is to be a happy one.
Mr Johnson has claimed the chance of a no-deal Brexit is “vanishingly small”, yet if a new deal with the EU fails to magically materialise over the next 90 days, crashing out of EU membership without a deal is the default legal position on 31st October. The economic shock of this, as Mark Carney warned on BBC Radio 4’s Today programme last Friday, would be immediate and severe. Yet if Mr Johnson is hoping for the best by aiming to agree a new deal with the EU within the next 90 days, his first actions as Prime Minister have been to put in place a ‘war-cabinet’ that’s planning for the worst. Leading that work is Michael Gove, whose extra £2.1bn to help prepare for an EU crash-out underlines his assertion that the government is now “working on the assumption” of a no-deal Brexit. In addition, with the government’s parliamentary majority reduced to one by the Brecon and Radnorshire by-election win for the LibDems, and a House of Commons that has consistently voted against No-Deal but cannot back the deal on the table, murmurings of an autumn general election grow ever louder. We are, it seems, in something of a tight spot.
And what of the impact on British luxury brands? The British luxury sector has grown 49% in the last four years. We employ nearly 160,000 people the length and breadth of the British Isles. We export 80% of what we produce. We create a value of £48bn and contribute more than £7bn to the UK exchequer. Yet we also know that a no-deal Brexit will result in a loss of 20% of British luxury’s exports – £6.8bn – and almost every day we hear from Walpole members of investment plans on hold, and of resources diverted to measures designed to mitigate the impact of Brexit. There isn’t a Walpole member that doesn’t feel a huge sense of consternation that the future success of British luxury – at least in the short to medium term – will be fettered by something over which we have no control.
So what can British luxury brands do? Walpole’s recommendation is that the prudent, pragmatic course of action is to escalate no-deal planning as a matter of urgency. Many of you are well advanced in your Brexit planning, others less so, but, given the export focus of our sector and the integrated European supply chains, we would ask that all Walpole brands check immediately that they are registered both for EORI (Economic Operator Registration and Identification) in order to be able to trade, and for TSP (Transitional Simplified Procedures) in order to facilitate EU imports. More on EORI , and how to register, can be found here and on TSP here.
Over the coming weeks, Walpole will issue as much guidance as possible, working closely with the Department for International Trade and other relevant government departments, and with the CBI. The latter has prepared an invaluable report with 200 recommendations to reduce the harm of no-deal – practical steps the UK, EU and businesses can take to reduce its worst effects – based on the CBI’s comprehensive study of existing plans laid out by the UK government, the European Commission, member states and firms. The detailed analysis includes clear, practical information on movement of goods; regulated goods; tariffs and taxation; Northern Ireland; regulated services; people; data; competition policy; global relations and EU programmes and we would strongly counsel all businesses to read the report and consider their own preparations against these recommendations.
In the immediate term, please read the CBI’s report and check your EORI and TSP registration and check the Walpole newsletter for further advice.
British luxury businesses are designed to be robust – you are entrepreneurial, creative, driven businesses with long-term thinking hard-wired into the business model – I am confident that the sector will go on to achieve the forecast £65bn in five years time, despite the difficult circumstances in which we find ourselves.
As Michael Ward, Walpole’s Chairman, says, the future belongs to the optimists: prudent optimists hope for the best, but ensure they are prepared in every way they can for the turbulence ahead. Walpole will do everything in its power to help.