On the 1st January 2021, the UK left the European Union with a trade deal and, over the coming months and years, lots of things are going to change. Some things will become more interesting, and others will become more infuriating.
But what does Brexit mean for sewers, small businesses, fabric buyers, fabric shops and the textile industry in general?
The flow of Fabric from Europe will slow down
In the short term, certainly during January and February 2021, there are likely to be problems. There are three reasons for this:
1. The new regulations are complex for EU businesses too
It's easy to think that all businesses were ready for Brexit on both sides of The Channel. But this is not true. The rules have changed considerably and while they are now similar to sending internationally, for example to, say the USA, they are written in language that does not make this clear - and they are not necessarily the same in every circumstance.
There are myriad issues including how to deal with import/export VAT and the new customs regime, which rely on clear advice and the lack of this has spooked all EU businesses regardless of whether they were already selling worldwide. In the UK the advice has been, to date, poor and lacking clarity - which is why we're seeing the current issues surrounding exporting in particular.
2. No one wants to be the first to try out the new system
Ports have been unusually quiet and the reason for this is that many UK businesses, including Simple Life Fabrics, decided to stockpile EU goods before the deadline. This is a sensible and reasonable approach to big changes. But it does mean that many EU fabric suppliers and UK retailers are now scared to be the first to try out the new customs system.
No UK shop really wants to make a new order and no EU wholesale supplier really wants to dispatch. This is an unspoken issue and someone will crack in the end.
The first sign of trouble ahead came when many EU businesses that sell to the public started suspending orders to the UK because they are very concerned. So it's no surprise that the ports are currently quieter than normal.
As I write this update to this blog post it's the 16th January and yesterday I plucked up the courage to make an EU order - I am not confident this will run smoothly. I have already had an email from the supplier saying it will not be dispatched until the end of January/beginning of February 'due to the Brexit'.
3. The paperwork is daunting
Finally, there is now 100% more paperwork than there was before Brexit - and the Border Operating Model document issued by the UK Government at very short notice in late December gives you some idea of how complex this really is. It runs to 159 pages of very dense guidance that for your average business is largely impenetrable.
In the olden days, fabric was transported to UK shops by a courier such as DPD with minimal checks. From 1st of January every consignment must be checked and must have the correct paperwork which includes the right product codes, descriptions, buyer and seller information and details of origin – i.e. in which country was it manufactured.
This information for every single order, which in the case of imports over £750 must be declared on the deceptively named Single Administrative Document - all 54 tick boxes of it, must be checked and verified by customs at the point of exit from the EU, usually a shipping port in The Netherlands or France, and then again at one of the UK ports such as Dover. If any of it is wrong, the consignment will be stored and then returned to the EU wholesaler - or in extreme cases, destroyed.
In the first couple of months at least, while systems bed in, if you multiply these checks hundreds of thousands of times every single day you can see that instead of fabric from a European wholesaler taking a matter of days to arrive in the UK, it could now take weeks. And if the paperwork is wrong, it will not get across the border at all.
That means, in the worst case scenario, the first part of 2021 will be see a dearth of new fabric designs hitting the shops. Plus, although we don’t do pre-orders, customers who do pre-order EU fabrics from other shops might find that they are waiting a lot longer than before. This is no one’s fault and is absolutely unavoidable.
Fabric from Europe will get slightly more expensive - or a great deal more expensive
Thankfully the UK managed to secure a trade deal with the EU. This means there are no tariffs on fabric, which would have added at least 6% onto the cost of fabric for shops and customers. But there can be no doubt that the cost of importing fabric from Europe into the UK is still going to rise - and this goes for buying from EU online fabric shops too.
If you're buying from fabric shops in Europe there will be delays and you will now, in most cases, be charged UK import VAT, plus any duties and a handling fee by the courier before they will deliver your parcel. In terms of fabric in UK shops, the price rises remain to be seen but there will be rises, and not just on fabric but on any goods imported from the EU including clothing, electronics, beauty products, and of course food.
There are a few reasons for this:
1. The cost of change for the European supplier
Pre-Brexit we were in the Single Market so for a wholesaler in The Netherlands sending fabric bolts to the UK was just like sending them to, say, Spain. But now the UK is a ‘Third Country’ and that means EU suppliers are deemed to be exporters, and UK businesses are deemed ‘importers’. This radically changes things such as the information needed on all the paperwork - and that means most wholesalers will need to make changes to their computer systems – or at the very least add a great many more details to a consignment on the courier’s website.
In addition, whereas prior to Brexit wholesalers added VAT at their country's rate onto an order they will no longer do this - the importer, i.e. the fabric shop will pay the UK VAT rate (plus any duties and handling fees) before the consignment is delivered. This might seem like a win for them but it isn't. They now have to complete additional paperwork for their respective authorities to verify that the goods left the EU in order to justify not charging VAT.
Until July 2021 checks on the border paperwork such as the Single Administrative Document for goods coming into the UK should be minimal as full checks are being phased in. However full checks will start when new regulations come into play in the middle of 2021. That said, problems are already apparent.
2. Paperwork takes time - and time is money
Secondly, this paperwork obviously takes time to complete – multiple extra steps have been added into the EU wholesaler’s workflow and they need to claw this reduction in efficiency back. Remember, large wholesalers work at speed in huge warehouses – behind the scenes, they have more in common with a factory environment than a retail shop. They generally do not have huge finance teams and this paperwork is a big, new, administrative burden.
3. Shipping costs will rise
Most importantly, the cost of shipping will definitely increase as courier firms must now jump through hoops at the border that did not exist before. These hoops slow them down and as we all know: time is money. They will levy surcharges to cover the time it takes to clear things through the new border – these costs will be passed on to fabric shops in the UK.
4. Other regulations that could add costs, such as Rules of Origin
In addition (& the impacts of this remains to be seen), Rules of Origin now come into play. This is where an exporter, in our case the textiles wholesaler in the EU, has to state on the customs forms where the fabric was originally manufactured. If the UK does not have a set of preferential trade terms with that country, customs duties will apply, even though we have a free trade agreement with the EU.
These duties could be steep. A great deal of fabric is manufactured in Turkey (they are a global powerhouse for textiles) and thankfully we secured a deal with them on preferential terms on 29 December - just before the deadline. But, if the fabric originates elsewhere outside the EU before it gets sold into the UK then duties may still apply.
5. Increased demand due to shortages of fabric
If there are shortages of fabric this could also push up prices. Where demand is high the manufacturer can raise its prices (sometimes they must because the raw material prices also rise); the EU wholesaler must respond and the UK fabric shop ends up paying a lot more per fabric bolt.
If we add all these costs together we’re doubtless looking at price increases at some point down the line on all EU-sourced fabrics in all UK shops and for all customers. How much, and when, is not yet known – UK shops will always try to absorb as much cost as they can for as long as they can, and it’s possible that, once it all pans out, these costs will not add very much to a customer’s average order. But it's also possible that they could add a significant amount. We'll all find out in a few months time...
Some European wholesalers (& hauliers) might decide the UK is more trouble than it’s worth
Price rises are not, in my view, the most pressing issue – or biggest problem.
It became apparent in November 2020 that many EU wholesalers were struggling to find the information they needed to operate under the new UK-EU relationship. This is not surprising, since many UK businesses were, and still are, struggling.
There was always a danger that some EU wholesalers might decide to suspend exports to the UK – cutting off the flow of their fabric entirely, and in fact at the time of writing this has happened in one notable instance. A very large EU fabric wholesaler has emailed its UK retail customers to say they have suspended fabric deliveries to the UK until the end of January.
In addition, getting the fabric into the UK is likely to become harder over the next few months. In fact, one of the world's largest hauliers, German firm D B Schenker, announced on 13 January that they were suspending deliveries from the EU to the UK - primarily because EU businesses were not completing the new customs paperwork correctly - not a huge surprise given its complexity.
If either the wholesaler or the hauliers/couriers decided to extend suspension periods and others follow suit it could be catastrophic, especially for sellers of jersey fabric as the vast majority of this comes from EU wholesalers.
However, I think this suspension is unlikely to last more than six weeks at the outside. UK fabric shops have very close ties and partnerships with EU suppliers. It’s not a relationship - certainly for me – that is built on sand. We communicate regularly, trust and respect each other. In terms of the couriers and hauliers I think that's going to get worse before it gets better: more logistics firms will suspend deliveries to the UK not least because many drivers, having been stuck in queues with the wrong paperwork, are now unwilling to come to the UK.
But where a much smaller supplier does not sell a great deal into the UK it’s quite possible that they might think we’re more trouble than we’re worth. That’s one of the reasons, along with outstanding quality, why I tend to buy from bigger, more established brands such as Poppy Europe and Swafing.
UK wholesalers could save the day
We are lucky enough to have a number of excellent, very supportive UK wholesalers who import EU fabric in large quantities – much larger than any individual shop could do. They will doubtless, and rightly, see Brexit as an opportunity to strengthen their partnerships with existing EU suppliers, and reach out to EU manufacturers direct. They will still experience the same delays and paperwork problems but they have the experience, patience and manpower to ride it through.
Over the coming year we may well see an influx of new brands and designs into UK wholesalers which will allow shops access to EU fabrics without the headaches of importing it in smaller quantities themselves. Obviously there is a danger that this will create price rises due to a lack of competition, but we must hope that any rises are kept to a minimum.
Fabric from outside Europe could get cheaper – but it might not
The flip side of all this is that fabric from other parts of the world could get cheaper – but to be honest there is no guarantee. It appears, at the time of writing, that most new trade deals are just roll-overs of the terms we had when we were members of the EU. But as time goes on, it’s likely that we will agree deals with more favourable terms, reducing or even eliminating any duty. But the shipping costs will still be high, and smaller businesses like mine will still mainly rely on UK wholesalers to do the importing from Asia and India etc.
Is it all bad?
The short answer is ‘no’. Change creates new opportunities and these are often things we can’t predict. It’s quite possible that Brexit will shake up the types and brands of fabric we see in the UK, and that alone is an exciting prospect. Whatever happens, at Simple Life Fabrics we’re embracing the change, working hard and will always keep on offering you useful, beautiful and unusual fabrics in 2021 and beyond.