Britains voting this Thursday to leave the EU will have major implications both in and outside the country. As one of the world’s leading manufacturing countries of quality footwear Brexit affects this industry a lot, here I briefly go through the short-term and long-term consequences of the British exit of the EU.
After the vote was finished and it was official that the leave side had won, the British pound fell massively, especially against the dollar and the euro. This means that it has become cheaper to buy shoes from England. It also becomes cheaper for stores outside the UK to buy British shoes, as the pound is lower. So even if the prices may not be reduced we can expect to see no more raises in English shoes prices like the heavy raises we’ve seen the previous years. This led many to cheer in online forums yesterday, and of course it is for non-British people who want to buy British shoes now favorable, for a start. But the problem is how it will affect in the long run.
For the British shoe companies it will now be more expensive to purchase materials. All depend on imported hides, mainly from France, Italy and Poland, and the leather prices have already rised has in recent years, now with a weak pound and soon also import levies on businesses, these costs will increase significantly. This will then result in higher prices for the shoes, for British people it will be a clear difference, and for international customers an even greater since stores that buy British shoes also will be applied with import duties, and there will be duty and sales tax on all private purchases. Even if one can deduct the British VAT, prices will be significantly or very significantly increased.
If we take a shoe from the British brand Loake’s 1880 line and having it imported to Sweden as an example (since here I know the figures quite well, they will differ for all countries, but this can be some sort of guideline), it cost £215 today, which with the current sterling rate is about 2 500 SEK. If we ignore the probably increased prices of shoes I mentioned, since it’s hard to tell exactly how large they will be, and just look at what it means import wise, it looks as follows.
The shoe costs: £215 / approximately 2 500 SEK, which excl. VAT is £179 / 2 083 SEK
Shipping will be (to send in the EU tend to be cheaper and quite often free today, now you can expect to have to pay shipping on most things from United Kingdom to other EU countries): flat rate of £ 20/230 SEK
In Sweden, VAT is 25% (including the shipping cost): 683 SEK
The duty of the shoes are high in most countries, in Sweden today it’s 17-18% (only goods over 1 400 SEK avoid customs duty): 450 SEK
In general there will also be an administration fee from the shipper, we take the Swedish postal service PostNord’s standard tariff as example: 100 SEK
Hence, a Loake 1880 shoe would come to cost 3 546 SEK when buying online from England, instead of the current 2 500 SEK with free shipping, or 2 730 if we have to pay shipping. An increase of 30-40%. Hardly something to rejoice over.
There are other aspects of it as well. For example, there is a risk that it becomes more difficult for non-Brits to move to England and learn bespoke shoemaking and work within the profession there, something many people from all over the world do today. And I’ve talked to footwear brands who are based in the UK but has its production elsewhere in Europe, which are now considering moving their businesses from England to continue to be based in the EU.
It’s obviously difficult establish exactly how Brexit will affect the world and the shoe world. The fact that as I understand it every single English shoe brand has been strongly opposed an EU exit is in any case a signal about something.