Fashion retail’s plea for new PM

After weeks of economic and political turmoil, the fashion industry breathed a collective sigh of relief this week as the UK appointed a new prime minister.

Rishi Sunak, the former chancellor of the Exchequer, was confirmed as the new prime minister, taking office on 25 October. Former prime minister Boris Johnson and Penny Mordaunt, who has served as leader of the House of Commons and lord president of the council since September, dropped out of the leadership race before the bid deadline at 2pm on 24 October.

The race was triggered when former incumbent Liz Truss resigned on 20 October following a chaotic six-week stint as premiere. She said she came into office (on 5 September) at a time of “great economic and international instability” but could no longer deliver the mandate on which she was elected by the Conservative Party membership.

Her term was dominated by a mini-Budget on 23 September that promised unfunded income tax and corporation tax cuts which pushed the government’s bond yield to a record high and the rate of sterling to a record low against the dollar. Following market reaction to the fiscal plan, Truss sacked chancellor Kwasi Kwarteng and replaced him with Jeremy Hunt, who reversed almost all the tax cuts in an emergency budget on 17 October, including cuts to income tax and corporation tax.

In his first speech as the prime minister on 25 October, Sunak said there were “difficult decisions to come” and he pledged to unite the country.

Although he has not yet delivered a mandate, many fashion businesses, including retailers, brands, suppliers and agents, welcomed the appointment of Sunak, who they hope can provide some confidence and stability for the sector – as well as consumers – in the run-up to the peak trading season.

“We welcome the news that Rishi Sunak is the new British prime minister, and we hope this ends the period of uncertainty for business’ and the country as a whole,” said Jeff Moody, commercial director of Bira, the British Independent Retailers Association.

“Anything that will stabilise financial markets and improve consumer confidence will help the high street in such a vital trading period is key and we hope that they restore the much-needed confidence in the financial market after so many weeks of turbulence.”

Helen Dickinson, CEO of the British Retail Consortium, agreed: “We congratulate Rishi Sunak on becoming Conservative Party leader and the prime minister of the UK. He takes office during one of the most challenging economic periods consumers have known. With consumer confidence at historically low levels, he will need to provide certainty to households and support them through the cost of living crisis.”

Inflation rose to 10.1% in the 12 months to September, from 9.9% in August and returning to a high last seen in July, the ONS reported. Sterling fell to its lowest level against the dollar since 1971 on 26 September, following the mini-Budget announcement, but rebounded after Sunak was named the new prime minister. It was currently trading above $1.13 as Drapers went to press.

‘We welcome the news that Rishi Sunak is the new British prime minister, and we hope this ends the period of uncertainty for business’ and the country as a whole.’

Jeff Moody, commercial director of Bira, the British Independent Retailers Association

UK consumer confidence fell to -20% in the three months to 30 September – the lowest level since Deloitte’s Consumer Tracker began in 2011, and twice as low as the same period in 2021, when it was -10%. Retail sales volumes in September fell 1.4% month on month, the Office for National Statistics reported.

Simon Calvert, managing director of clothing printing firm T Shirt & Sons, said: “The world is in an exceptional economic condition and no prime minister is going to make that go away any time soon, but stability and confidence is what the fashion retail industry will be looking for in a new prime minister. We need someone to stabilise the ship and give confidence.”

Andrew Pace, director of high street clothing supplier Panda Sourcing, agreed: “We need some confidence back in the country, which would help stabilise the pound and bring down import prices, ultimately bringing down inflation.

“I would expect that thanks to Sunak’s experience [as the former chancellor], he probably has more idea of how to balance the books and grow the economy [than Liz Truss]. There is likely to be more confidence and stability in the country [now that he has become the prime minister], but we will have to see what his actions are.”

Sunak has not yet set out any policies, however when he was the chancellor, he introduced a 1.25% rise in National Insurance, which has now been scrapped by Hunt and announced a corporation tax increase from 19% to 25%. During the run-up to his first leadership contest with Liz Truss, he said he aimed to bring down taxes in the future after inflation is brought under control.

In his first speech as prime minister on 25 October, he pledged to enact the policies of the 2019 election manifesto, which won Johnson a large majority for the Conservative Party.

Many of the policies set out by Truss including the removal of a ban on fracking and the unfunded tax cuts in the mini-Budget, however, go against the 2019 manifesto.

Simon Carter, founder and CEO of menswear brand Simon Carter, said the process that Sunak became the new prime minister is “an affront to democracy” and said there should have been a general election: “My sentiment [towards Rishi Sunak] is the same as the market – it improved by about two cents.”

Drapers asked the government for a response on this, but it pointed to Sunak’s speech this morning (25 October) where he said that the mandate the Conservative Party earned in 2019 is not the sole property of one person, rather “it is a mandate that belongs to and unites all of us” and he will deliver on its promise.

Nevertheless, no matter who sits in office, fashion businesses are calling for energy support, help with cost of living, business rates and trade with the European Union.

Simon Cotton, owner of textile manufacturing group Macnaughton Holdings, said: “We’re concerned about the high levels of volatility in exchange rates and the energy market. The new prime minister needs to provide clarity of what will happen after the six-month period of the energy price cap for businesses. The uncertainty of that has made it extremely difficult for us to make decisions as a business such as investment and pricing.

“We are seeing a 25% surcharge applied from some of our suppliers just to recoup the cost of energy, which will be even higher if they don’t receive further support following the six months.”

A government spokesman responded: “We are protecting businesses from high energy bills this winter, caused by Putin’s devastating invasion of Ukraine [since February].

“The Energy Bill Relief Scheme protects businesses from soaring energy costs and provides them with the certainty they need to plan through the acute crisis this winter. A Treasury-led review will consider how to support businesses from April 2023, targeting taxpayers’ money to the most vulnerable.”

Meanwhile, Cormac Folan, co-founder of menswear brand Alder & Green, said: “I think the negative impact Brexit has had on trade and retail in particular is still massively under-reported. Any new PM needs to face this fact, and set out some support and clarity for retailers looking to export or import from the EU. It has made nearly every part of the trading process more difficult, costly and confusing for both businesses and consumers alike.”

The BRC’s Dickinson called for a fix to the business rates system: “Retailers are playing their part in supporting their customers, shielding them from the worst of rising costs resulting from a weaker pound, tight labour market and war in Ukraine.

“However, these efforts are threatened by the £800m bombshell of additional business rates that will hit retailers in April – a 10% rise that far outstrips sales growth over the last year. To support consumers at this difficult time, government should freeze business rates and reform the broken transitional relief system, or it will be households that pay through higher prices.”

In the autumn Budget last October, businesses with a maximum of £15,000 in rateable value in the retail, hospitality and leisure sectors were given a 50% discount on business rates, up to a maximum of £110,000. The scheme covers the 2022/23 financial year and the government has not confirmed whether the scheme will be extended.

In February, the government launched a consultation into possibilities for an online sales tax to ease the business rates burden on high street stores. The three-month government consultation on whether to introduce an online sales tax closed on 20 May. The latest consultation on business rates ran from 30 May to 25 July, seeking views on the format of the transitional arrangements for the 2023 revaluation. The government has not given any update to either consultation.

Elsewhere, Touker Suleyman, CEO of British shirt brand Hawes & Curtis, called for the government to reduce corporation tax to make the UK “competitive in the international world”.

Amid the economic uncertainty, the fashion industry is in agreement that if nothing is done in terms of immediate support, there will be a tough few months ahead as economic headwinds persist.

A non-executive board member of a fashion and homeware retailer said: “Most places are finding trade soft and it’s going to be like this for a while, until after Christmas at least. Christmas is going to be very tough [because] most people can eradicate the issues of fuel, most or many, by just buying 10% less [of anything] and just by being careful.”

Erica Vilkauls, retail consultant and former CEO of LK Bennett, agreed: “I fear that the change to corporation tax, together with the business rates, will mean some retailers will go to the wall. As far as these industries are concerned ‘Rome is burning’ and the focus is anywhere but. I fear we will get to spring and will see fewer shops on the high streets.”

The new prime minister is likely to bring back some stability and confidence to the UK and financial markets. The fashion industry will be looking forward to seeing what policies Sunak will announce to stimulate growth in what are set to be tough times ahead.