Come what May: With Brexit now triggered, UK’s modern luxury CEOs discuss the early impact.
For most, it’s actually been great for the bottom line. But there have been workforce and supply chain issues––not to mention serious personal implications for CEOs who are EU nationals. (1,057 words)
LONDON — Consider it signed, sealed, delivered. Not even a year into office, UK Prime Minister Theresa May has done exactly what she promised when taking office last July: Setting Brexit into motion by invoking Article 50 last Wednesday.
No matter where you stand on the policy, there’s one thing you surely can’t argue: Ms. May is, if nothing else, a woman of her word. Yet as ongoing Brexit coverage continues around the clock, the basics of why it matters tend to get lost in the noise. So before we assess how the policy might affect London’s modern luxury operators, we’ve left you with a few Brexit basics to bring you up to speed:
- It’s definitely happening: No more debate. With Article 50 now triggered, the Brexit referendum is unequivocally set into motion and the UK will be leaving the EU.
- In motion — but not immediate: There’s a two year deadline. The UK and the EU now have until March 29, 2019 to detangle themselves and negotiate a deal. By many accounts 2019 is optimistic: It could take much longer to find a landing zone. Failure to reach an agreement would force the UK to operate under World Trade Organization rules, which would mean customs checks and tariffs.
- The people factor: Roughly 8.25% of the modern luxury workforce in the UK are EU nationals who now face an unclear future there for at least the next two years.
Make no mistake, Brexit could have far reaching consequences for modern luxury companies (MLCs) based in the UK. This is especially true when considering that London is a top three MLC economy: For the modern luxury sector, New York remains king, but London is nipping at its heels, and is currently home to the second largest number of MLCs who’ve either started or operate there.
The trouble with Brexit stories is that they tend to only be told from a political or policy-making point of view. Rarely will you find Brexit reports fully addressing the impact it might pose on business — let alone the startup and small business community in which most MLCs reside.
We wanted to get real intel from key upstarts on the ground, to hear it straight from the companies and founders themselves. Our core question: What’s been Brexit’s early effect on their business, and how concerned are they about the problems it might pose after 2019?
Their responses are revealing:
Brexit has actually been good for business. The consensus from those who spoke to Lean Luxe was that Brexit has been surprisingly good for the bottom line so far. Michael Hill, CEO of Drake’s of London, a menswear firm (and one of the remaining few UK brands still manufacturing domestically), said that things have been “largely positive” since the Brexit referendum. And while Drake’s would prefer “long-term stability and prosperity, than weak Sterling caused by uncertainty”, they’re not the only UK manufacturer that has seen a bump in their business over the last nine months. Christophe Michel, CEO of Perfumer H, a niche fragrance firm, argued that the uptick is due to an influx of “European shoppers [now] keener to visit and spend in the UK” given the falling British Pound.
Still, there are big supply chain concerns. For Monocle, a business that’s reliant on an international supply chain, distribution network, and workforce — and whose core business is conducted more in Euros and US Dollars than in Pounds Sterling — the outlook was far less rosy. In a call with Lean Luxe, Chief Tyler Brule noted that even before Brexit was on the table, internally they’d had conversations about optimizing their distribution to be less reliant on the UK. But today, the frequency of those conversations has gone from being occasionally brought up at the infrequent board meeting, to being discussed almost daily.
In his assessment on the matter, Toby Darbyshire CEO of Heist Studios, a direct-to-consumer women’s hosiery upstart, was more blunt: “Where the impact is likely to be greatest, is in the forgotten parts of the supply chain like our packing and logistics partners who have built their success on the backs of a workforce almost entirely made up of European labour,” he said. “The fact that our packers had to do staff seminars on Brexit in seven EU languages illustrates how dependent they are on freedom of movement and how dumb any idea [is] that our economy will be better off with an Australian free trade deal.”
Workforce is also a big worry. Workforce issues weighed heavily, and one big concern shared by most who spoke to Lean Luxe was of a more personal nature: the security of their employees. The degree of optimism varied from person to person, but most were hopeful that the UK would take the necessary steps to retain European workers.
Yet even at this early stage, some cracks have begun to form. At Monocle, the impact has been very real. A handful of foreign staff members resigned after tough family talks while at home over the holidays. Monocle has noticed a reduction in applicants from EU-based job seekers too. And current and prospective employees have also inquired about the magazine’s commitment to providing them with alternative options, in the event that they’re no longer able to work in the UK.
There are personal implications for EU-born founders themselves. Brexit could also extend beyond business and into founders’ personal lives. Both Perfumer H’s Christophe Michel, who’s from France, and Mats Klingberg, who is Swedish and owns one of London’s key menswear boutiques, Trunk Clothiers, are concerned about what Brexit’s new rules could mean for their ability to live in the UK after 2019. “I don’t know if I’ll be able to remain comes 2019, and under what conditions,” Michel told us. “So uncertainty is clearly the best word to define the current situation, and mood.” Klingberg, on the other hand, has already taken steps to stay: “I decided to apply for permanent residency and that got confirmed a couple of weeks ago.”
Keep calm, carry on? Without question, the insecurity brought on by Brexit has already left a mark. But the British are a resilient bunch, and London’s MLC leaders are likewise committed to facing this challenge head on. Heist’s Toby Darbyshire summed up the general feeling rather well: “We’ll be fine,” he said, “but Boris is a dick.”