LONDON — A no-deal Brexit could cost Britain’s luxury goods industry 6.8 billion pounds per year, according to data commissioned by Walpole from the consultancy Frontier Economics.
The report, released 24 hours before British members of parliament cast the first in a series of make-or-break Brexit votes, said no-deal Brexit could reduce the amount of U.K. luxury exports to the European Union by 6 billion pounds, while exports to Asia-Pacific would decline by 800 million pounds.
This means that up to 20 percent of the U.K.’s luxury exports would be at risk because of “detrimental changes to market access,” including delays at borders, higher tariffs and additional compliance costs following the country’s exit from the single market. Nontariff measures, such as health and safety or environmental regulations, will also take a bite out of export gains.
Walpole, the sector body for Britain’s luxury industry, released the data ahead of a vote on Theresa May’s latest Brexit deal, which is set to take place on the evening of March 12.
“British luxury businesses are committed to staying in Britain, but we are losing patience with the government taking us to the knife edge of no-deal. We urge the government categorically to rule out a no-deal exit,” said Walpole’s chief executive officer, Helen Brocklebank.
The report also stressed the reliance of the British luxury sector on exports, with 80 percent of luxury products made in the U.K. destined for overseas markets. The sector is also important for driving tourism and creating jobs in key manufacturing hubs across the country.
“Modern luxury is a true British success story, driving domestic employment, boosting tourism figures and showcasing the strength of our soft power on the world stage. We can now clearly see the devastating impact of a no-deal Brexit on the British luxury industry,” said Michael Ward, Harrods’ managing director and Walpole’s chairman.
“The government must categorically take no deal off the table to prevent further damage to this important sector, as well as an end the uncertainty which continues to stifle businesses across the U.K.”
Ahead of Brexit, and all of the uncertainty it is causing, British consumers have been shunning stores with footfall dropping by 2 percent in the four weeks from Jan. 27 to Feb. 23 — an unusual decline given that this was the hottest February on record, while schools were closed for the usual late-winter holiday.
On Monday evening the pound was down 0.5 percent to $1.29, ahead of the parliamentary vote, the first of three planned votes this week that will determine whether the U.K. leaves the EU as planned with a deal, or with no deal, on March 29 or later if members of parliament lobby for an extension to the exit date.