LONDON — Breaking up is so very hard to do.
British and European retailers, fashion brands and industry figures have expressed their overwhelming disappointment at U.K. voters’ decision to exit the European Union, and admit it’s still unclear how their businesses will be impacted.
Overnight, as the results came in, the pound fell to a 30-year low against the dollar, but later gained ground in what has been a rollercoaster day. Early Friday evening, it was trading at 1.23 euros, up from a low of 1.20 euros, and had rebounded to $1.37 after falling to a low of $1.32.
The FTSE 100 clawed back some lost ground, closing down 3.2 percent at 6,138.69 after hitting a low of 5,788.74. European markets also took a hit: All of the major ones were in retreat at the day’s close, with losses at Milan’s FTSE MIB widening to 12.5 percent.
Luca Solca, managing director at Exane BNP Paribas, told WWD that luxury goods could suffer – but also benefit – from the decision to leave. He believes the major foreign exchange swings will be positive for British and European companies as their currencies devalue. However, he also pointed to a “possible depressing effect on global GDP growth” from Britain’s decision to exit and added it is “incredibly sad to see the U.K. leave the EU.”
The vote to leave – with 52 percent voting in favor and 48 percent wanting to remain – has sent shock waves through Britain and the Continent.
Scotland’s first minister Nicola Sturgeon, a pro-Europe campaigner, said it’s now “highly likely” the country will hold a second independence referendum – the first was two years ago – with the goal of Scotland remaining part of the European Union. Meanwhile, EU leaders are now insisting that Britain start the process of withdrawal sooner rather than later, following crisis talks in the European Parliament on Friday.
Prime Minister David Cameron said he will step down later this summer and Britain’s new prime minister – who will be named in October – will be the one to negotiate Britain’s departure. On Friday morning he told the British public that he’s clearly not the man to finesse the raft of new trade deals that will be required with the EU, while Bank of England governor Mark Carney has assured the country there are contingency plans in place to keep the economy humming and financial markets moving.
British designers, universities and related institutions were very much in favor of the country remaining in the EU, arguing the freedom of trade and flow of citizens was a boon for business — and creativity.
Many in the industry throughout Europe immediately took to social media to express their disappointment in the result, which saw a record turnout of 72.2 percent, with 52 percent voting in favor of Leave and 48 for Remain. Analysts also warned that the result could impact luxury goods and fashion firms that do business in Europe, given the drop in the value of the pound against the euro and dollar.
“A dark day indeed,” wrote Christopher Raeburn, who took his bow during London Collections: Men earlier this month in a T-shirt that trumpeted his pro-Europe stance. “Heading to Paris for SS17 sales, to continue to meet and work with our European friends and to work out how this will impact in the longer term.”
Sibling’s Cozette McCreery, who took her bow at the men’s collections with co-designer Sid Bryan wearing an IN T-shirt, wrote: ‘I’ve never been more disappointed in my own country. A divided country. An idiot prime minister. A fool waiting in the wings.”
Adrian Joffe, chief executive officer of Comme des Garçons and Dover Street Market, told WWD: “F–k democracy, we’re back in the Middle Ages. For me, it’s a step backward, it’s not the modern world. The modern world is about being together and working together. I’m devastated. I want freedom of people, freedom of movement. For me it’s anti-creative thinking.”
Speaking at his spring 2017 men’s presentation for the Spanish brand Loewe, Northern Ireland native Jonathan Anderson expressed sympathy for the young people in the U.K., many of whom voted to Remain in the EU. “Their voice will now not be heard,” he said.
“I think it’s very, very disgusting, this situation,” Anderson said. “We’re really just voting here about immigration. To be honest, we should never have voted on this in the beginning.”
He said he was puzzled about Brexit’s potential impact on his eponymous London-based business. “I have no idea,” he said. “It’s very worrying to be at this moment…I really hope American looks to a situation like this and takes note. This is the world we live in. It’s that radicalized.”
“Beyond the economic impact, there’s a political and cultural aspect,” said Pascal Morand, executive president of the Fédération Française de la Couture, du Prêt-à-Porter des Couturiers et des Créateurs de Mode — French fashion’s governing body. “It’s an inward-looking instinct. Fashion is at the opposite of anything inward-looking. Fashion is about open-mindedness and fashion is at the forefront of modernity, internationally, digitally and esthetically,” he said before adding: “We have to be even more tight-knit than before and move forward. It’s a question of values.”
“It’s a very bad news,” said François-Marie Grau, managing director of the French Women’s Ready-to-Wear Federation. “The U.K. is our fifth client in terms of clothing exports. French apparel exports to the U.K. were up 16 percent to 750 million euros [or $832 million at average exchange] in 2015.
“We see two impacts in the short term, plus one big uncertainty: firstly a monetary effect with the plunge of the British pound that will make our collections more expensive. Secondly, we’re bracing for a challenging export market with a decrease of consumption in the U.K. Then, the U.K. has two years to negotiate the free-trade agreement. If there’s a customs union, it won’t change anything. But if customs tariffs are being restored, that will make our collections even more expensive. Typically, the U.K. has a 12 percent customs tariffs for countries outside the E.U.”
Early this morning, French designer Anne-Valérie Hash posted a photo of European country flags accompanied by the hashtag #Whatasadday, while Felipe Oliveira Baptista posted a photo of David Cameron with a caption that read: “You’re history #DavidCameron.”
Caroline de Maigret put online a quote from Nelson Mandela – “May your choices reflect your hopes, not your fears” – on a black background with a broken heart emoticon as a caption. Diane Kruger and Yaz Bukey were among those posting a map of Europe with scissors cutting the lines linking the U.K. to the European Continent. Meanwhile, public relations executive Lucien Pagès posted a photo of a dark tunnel with the hashtags #eurotunnel #intothedarkness.
Paris Mayor Anne Hidalgo reacted on Twitter, writing, “I just heard the grave news about the the U.K. referendum. It’s a sad day for Europe and all European cities. I want to pay tribute to my friend @SadiqKhan [the new mayor of London] who fought with courage to remain in the E.U. Friendship between our two cities will remain powerful.”
“I feel strongly about building bridges between Paris and London, favoring solidarity and exchanges, instead of creating competition.”
On Friday, Sadiq Khan offered an olive branch to Continental Europeans living in London: “You are very welcome here. As a city, we are grateful for the enormous contribution you make, and that will not change as a result of this referendum.
“There are nearly one million European citizens living in London today, and they bring huge benefits to our city – working hard, paying taxes, working in our public services and contributing to our civic and cultural life. We all have a responsibility to now seek to heal the divisions that have emerged throughout this campaign – and to focus on what unites us, rather than that which divides us.”
The fashion photographer and media entrepreneur Nick Knight of Show Studio wrote: “Xenophobia, ignorance, stupidity and fear are now the forces driving this country. The politicians both left and right have totally let us down.
“This completely unnecessary referendum was called for self-servicing political reasons by Cameron who has now fled, leaving the country in the hands of nationalistic bigots and fools. I am ashamed, disgusted, heartbroken and very angry.”
The British Fashion Council took a measured stance, as did University of the Arts London, UAL.
While BFC chief executive Caroline Rush said there will “no doubt be upset and dismay at today’s result” the organization has a role to play in keeping government abreast of the industry’s priorities “and keeping the designer community updated on any likely impact to business as our country prepares to leave the EU over the coming years.”
Although the BFC never took a stand on Brexit, it released a survey earlier this month showing overwhelming support for the Remain campaign. As reported, the fashion industry sees itself firmly as part of a great international community and relishes London as a capital of finance, tech, creativity and innovation. It also views the country as a beacon of generosity, open-mindedness and progressiveness — all arguments Cameron has been making for reasons to stay.
Earlier this year, 198 business leaders — including Burberry’s chief creative and chief executive officer, Christopher Bailey; Kurt Geiger chairman Neil Clifford, and Jacqueline Gold, head of the high-street lingerie chain Ann Summers — signed a letter stating they wanted to remain part of Europe.
Last month, more than 280 British creatives signed another letter voicing their support for the Remain camp. They included designers Vivienne Westwood, Patrick Grant, Bella Freud, Katharine Hamnett, Hussein Chalayan and Daniel Fletcher. British Vogue editor Alexandra Shulman has also been vocal in her support of Britain staying put.
Fashion designers and creatives immediately took to social media Friday to voice their discontent with the referendum result.
Westwood posted a Sex Pistols’ “No Future” sign.
Sibling posted a “No Comment” picture, accompanied by the words: “#SIBLING ARE #EUROPEAN #SIBLINGsquad IS STRONG THROUGH UNITY & WILL CONTINUE TO BE #PEACE #LOVE #ACCEPTANCE #HOPE WE WILL NOT BE DEFINED THROUGH THE ACTS OF OTHERS #SIBLINGsquad #NOtotheReferendum #REJECT #REVOLT.”
Not only the Brits are commenting the outcome – Italia Independent’s Lapo Elkann wrote: “Given that I’m an ardent defender of democracy in all its forms and thus respecting the freedom of expressing a vote, I am astonished for what’s happened in Great Britain. I’ve always been a supporter of Union and not of divisions. While staying united we can stimulate growth and progress, not the other way around. As an European citizen and entrepreneur I can only fear the consequences of Brexit that are already afflicting Europe and the planet’s economy and history.”
Katie Grand wrote: “I’ve never been so unproud to be British,” while the official Instagram account of LOVE magazine asked ironically “Trump next?”
Grand was not far off. On Tuesday afternoon, Donald Trump touched down in Scotland for a visit to his Trump Turnberry golf resort, and said he welcomed Britain’s decision. “The UK will be stronger for it. They have taken their independence back. They can block anyone coming in they do not think is appropriate,” The Guardian newspaper reported.
Blogger Susie Bubble posted a picture of a puzzled U.K. flag, writing: “A broken and fractured 🇬🇧 puzzle of pieces that may not ever come together again. This is not the country I know and love. Let the chips fall where they may, but I’m doubtful it will be a place I want to stay in or have my children grow up in.”
Other brands expressing their concern via social media included Alexander Lewis, Erdem, Roksanda, Shrimps, Fausto Puglisi and Nicholas Kirkwood.
Bella Freud posted a picture of the now famous Bristol street-art kiss between Donald Trump and Boris Johnson: “Woke up to this. RIP Europe. 💔”
Daniel Fletcher posted a black picture and wrote “Devastated.”
Kinvara Balfour tried to find the silver lining: “This is Great Britain. We have always been great. Though no longer part of the EU, we are still a part of Europe & we are a part of THE WORLD. Let’s honour that, take responsibility for that, work for that & be proud of our own powerful nation. Courage & focus are needed but this is a new chapter, not the end 👊”
Muzungu Sisters’ Dana Alikhani and Tatiana Santo Domingo wrote: “Mate, what have you done? 💔 hearbreaking and scary. Shocked this is happening. A victory for fear mongering and xenophobia. London is so out of touch with the rest of this country. Pound hits lowest level since 1985 💔 #brexit #June23.”
Toby Bateman of Mr Porter posted a screenshot from Ben Riley-Smith’s Twitter profile, where he posted the breakdown of how ages voted, and commented, “Now the next generation has to live with the decision of the past generation. Lost for words.”
According to the results, 75 percent of Britons aged 18-24 voted to remain, while only 39 percent of people ages 65 and over did.
The London university UAL said it remains committed to all of its students, regardless of nationality. It stressed that any EU students who are already studying at the university, which includes London College of Fashion and Central Saint Martins, and for those starting at UAL in 2016, all fees will be held “at the same amount as is paid by U.K. students.”
EU students currently pay the same as British students at universities in the U.K., while non-EU ones often pay about double.
“Leaving the EU will undoubtedly have an impact on UAL in the longer-term. We are working on our plans for the transition period and beyond. All of our plans will reflect our ongoing commitment to European collaboration and to our student body,” it said.
Boudicca co-founder and designer Zowie Broach, who is also head of fashion at Royal College of Art in London, said that as a designer, remaining part of Europe made sense. “It was natural, forever and always.” She said that though she feels “very emotional,” she is spending her day listening to the students talk about their work and about the future, “and the brave and fearless opinions about who we are.”
Companies that do business in the U.K. and abroad also weighed in, with a L’Oréal spokeswoman saying the company’s primary commitment is to its employees and stakeholders. “We remain focused on best serving our consumers in the U.K.,” she said.
Rubin Ritter, member of the board of German e-commerce giant Zalando, said the company believes in the advantages that result from a single European market, but also respects the U.K.’s decision.
“Of course we will adapt our processes concerning the U.K. market in order to remain compliant. We also have experiences with markets outside of the EU, and are positive that we would be able to find a good solution and establish smooth processes for the U.K. and its Zalando customers.”
A spokeswoman for German beauty giant Beiersdorf said, “We have followed the United Kingdom’s referendum to stay in the European Union and, of course, we have prepared for the various scenarios beforehand. After the vote for the United Kingdom to leave the EU we now await further decisions and will adapt to the possible new conditions. The United Kingdom is and remains a very important market for Beiersdorf. Please understand that Beiersdorf does not wish to make any statements on political topics.”
Thomas Rasch, managing director of German Fashion, the Cologne-based association of fashion producers, noted that for German men’s wear makers in particular, the U.K. is one of the most important export markets.
“A weaker British pound will immediately have an effect,” he said. Moreover, Britain’s exit from the EU means “the movement of goods will become more cumbersome and bureaucratic again. But it will affect the British themselves even more strongly,” he suggested.
“The EU has negotiated preferential agreements with many sourcing countries that will no longer apply to them. They will surely regret this gut decision.”
Claudio Marenzi, president of fashion and textile association SMI-Sistema Moda Italia, which counts 400,000 people and almost 50,000 companies, said losing Britain means losing an adversary. “In the past and in the present (it) has opposed our industry: From the battle for production in Pakistan to the recognition of China’s status as a free economy and on the ‘Made In’ regulation.”
Carlo Capasa, head of the Camera Nazionale de Moda, said, “Surely Brexit is a process that will take at least two years and we hope that Europe can find agreements such as those with Norway that allow to maintain close commercial relations. But we are nevertheless concerned that Europe responds rather hard at the exit of GB bringing back the customs duties as well as anticipated today by Juncker. The main effects that we expect with regard to Italy are: The reduction of exports to the U.K. and to other European countries most exposed to the effects of Brexit, small positive effect on exports to other non-EU countries, and a braking in internal demand and a little decline in sales of Italian fashion companies, due to financial uncertainty, and consequently to possible restrictive maneuvers of the Italian government.
“Regarding the effects on the U.K., the negative effects will be a drop in consumption estimated between 1 and 3 percent per year. In addition it will have a difficulty on the exchange of workforce, difficulties on the displacement of people. Furthermore the retail oriented European companies will manage the omnichannel only locally and they will have problems in exchanging goods. The creative centers and the training centers, such as schools, large magnet and strength for the quality of the human factor, could have some problems because the European people who work and study there will become non-EU. We hope that what has happened with Britain is a warning for Europe to have a less stringent politic and more respectful of the weaker sectors of the population, leading in the medium term to a recovery in domestic consumption. We believe that to be competitive in the global market is important having a strong and large internal reference market.”
Norbert Lock, managing director, wholesale and retail for the German women’s wear label Marc Cain, said the company will have to accept the decision and move on: “We regret for our British customers that it came to ‘leave.’ I know that through their importer status they were against the Brexit, and now they have to cope with a weaker pound. We’ll behave as we have by other currency crises in Russia, Switzerland and other countries. We’ll support our clients and overcome the crisis together.”
He added that Marc Cain had “consciously pushed back several store projects until now, and we will examine the pros and cons, rents and costs, buying power and possible price changes. Today the U.K. decided, and we’ll consider the possible disadvantages and reactions quietly and calmly. But what remains valid is: Yes – for the client.”
Javier González, owner and general manager of the German company Cosnova Beauty, which makes the budget cosmetic lines Essence and Catrice (only Essence is sold in the UK), said it entered the market there in 2014 – and looks forward to taking advantage of the new Britain.
“With the weakening of the British pound and the likely introduction of import barriers and/or duties in the U.K. after Brexit, cosmetics brands will be obliged to increase consumer prices significantly in the next 2-3 years. With our very strong innovation, excellent quality and the best value-for-money ratio in the UK, we see ourselves as excellently positioned to grow our sales and distribution in the U.K. after Brexit.”
A spokesperson of Germany’s Metro Group called the decision “highly regrettable and an incisive event for European development,” and added that Europe has a full and robust future without the U.K.
“It is now vital to remain economically and politically level-headed. The EU needs to continue to develop and set the course for the future. The Brexit has by no means changed our conviction of the meaningfulness and the advantages of the European model for society, culture and the economy, and every effort has to be made so that we as Europeans can move even closer together. Europe is not just an episode – Europe is the future.”
Some British companies, such as fast fashion e-retailer Boohoo.com, was unruffled by the result. “While Brexit introduces a period of uncertainty for many UK companies, Boohoo is in the fortunate position of being a truly international business with its pure online offer,” said a spokesperson.
Their optimism may be too hasty, however: According to a report earlier this year from the British Retail Consortium, a lobby group, potentially big problems could arise for UK-based e-commerce companies. They could well be subject to increased customs controls, adding to delivery times and costs, after the U.K. leaves Europe.
Symrise, the German producer of flavors and fragrances, is taking a wait-and-see approach: “We have our own production facilities in the U.K., meaning that we produce for the U.K. market in the U.K. There might be some slight currency effects – but nothing major. Anything beyond that – we need to wait until we have any precise results from the upcoming negotiations, and then we will see what effects they might have,” said a company spokesperson.
Hans Van Bylen, Henkel AG chief executive officer, also said it was too early to say what the long-term consequences of Britain’s exit would be.
“I regret that this decision has been made, because I believe that the EU is considerably more successful as a strong common economic area. It would be better for Europe on the whole if Britain were to remain. We are a global enterprise. The immediate effects on our business in Great Britain are certainly manageable — we earn about two percent of total sales there. The long term consequences of Britain’s exit from the Union cannot be fully known today.”
Marks & Spencer echoed the sentiment: “It’s far too early for us to be commenting in any detail. We will be monitoring and assessing the impact on our business as the situation evolves and engaging as and when we need to,” said a spokesman.
Of the host of companies contacted by WWD, many declined to comment including Chanel, LVMH Moet Hennessy Louis Vuitton, Mulberry and Hennes & Mauritz.
By midday CET on Friday, Europe’s major markets continued their downward trajectory, with Milan’s FTSE MIB leading the downslide. The Italian market plummeted 10 percent to 16,159.09, followed by the CAC 40 in Paris, 7.9 percent to 4,110.48 and the DAX in Frankfurt, 6.6 percent to 9,578.06. The FTSE 100 in London fell 5 percent to 6021.84.
The pound recovered some ground, edging up to 1.25 euros from 1.22 euros earlier in the day, and to $1.39 up from $1.34.
Carney, the Bank of England governor, said on BBC earlier today that contingency plans are in place and that markets – and Britons themselves – should not panic. The bank had warned prior to the vote that leaving the EU could have significant negative impact on the economy, including tipping it into a “technical recession.”
“The bank has put in place extensive contingency plans and these plans begin with ensuring that the core of our financial system is well capitalized, is liquid and is strong,” he said in a TV speech shortly after Cameron’s resignation.
“This resilience is backed up by the Bank of England’s liquidity facilities in sterling and foreign currencies and all of these resources will support orderly market functioning in the face of any short-term volatility. The bank will continue to consult and cooperate with all relevant domestic and international authorities to ensure that the U.K. financial system can absorb any stresses and can do its job of concentrating on serving the real economy.
“We’ve taken all the necessary steps to prepare for today’s events and in the future we will not hesitate to take any additional measure required to meet our responsibility as United Kingdom moves forward.”
Banks said retail and luxury companies will be impacted by Britain’s exit based on how and where they trade and source.
Thomas Chauvet of Citi wrote that while movements in foreign exchange will impact luxury earnings and share prices, the bank believes that investors are focusing on the sector’s weak fundamentals and underlying revenue and earnings performance.
“Most EUR-listed companies have a relatively small exposure to the U.K., and the 4 percent appreciation of EUR/GBP today is likely to have minimal impact on EUR-denominated earnings. More importantly, the fall in EUR/USD would theoretically support gross margins and earnings per share upgrades at EUR-denominated companies and drive a gradual recovery in tourist-related demand in Continental Europe, which have significantly slowed since tragic terrorist events in Europe.”
Gian Luca Pacini, equity analyst branded goods at Intesa SanPaolo said, “The companies in the branded goods sector that Intesa follows, excluding the relevant part of Yoox Net-a-porter’s e-commerce business, have limited revenues and costs in pounds as they are diversified at a global level. Clearly, Brexit will have a temporary negative effect on stock prices.”
Moody’s said in a report Friday that it expects, over time, that the U.K. and Europe will come to an arrangement to preserve most – but probably not all – of the current trading relationships.
However, it also pointed to “clear downside risks.” It said substantial new tariff or non-tariff barriers to trading goods and services would have an adverse impact on U.K. sectors that trade extensively with the European Union market, such as automotives, manufacturing and food production.
It added the lasting credit effects of Brexit will depend on a new U.K.-EU trade model.
Kering, which has a headquarters in London and counts Christopher Kane, Alexander McQueen and Stella McCartney among the brands in its portfolio, said it accepts the Britain’s decision.
“As a global business evolving in a global market, Kering has a long and successful history of adapting to change. While it is too early to further comment on the implications of this referendum on the luxury business, Kering is confident in its ability to adapt to this new environment. Kering will continue to welcome initiatives to bolster collaboration, be it with regard to trade, talent or the exchange of ideas,” the company said.
The referendum result reverses Britain’s 41-year history in the EU and plunges the country into new waters: Cameron will resign within three months, and said it will be up to a new Conservative prime minister to negotiate new trade deals with the EU, and trigger Article 50, the law that outlines EU withdrawal procedures.
Although no exit polls were conducted, previous opinion polls had indicated that the Remain camp was ahead by a small margin. According to a poll by YouGov, which asked 5,000 Britons how they voted on Thursday, 52 percent said they voted to remain part of the E.U., while 48 percent voted to leave.