Tradebyte and Retail Economics explore the impact of Brexit to the UK-EU fashion supply chain, five years on.

It has been five years since the UK left the European Union as part of the Brexit deal and at the time concerns were high about the anticipated impact to the fashion sector.

According to new data from Retail Economics and Tradebyte, retail has been hit hard with sales dropping £5.9bn ($7.33bn) since Brexit.

Fashion exports have been hit hardest post-Brexit, falling by over 60% from £7.4bn in 2019 to £2.7bn in 2023.

Though apparel pre-Brexit was a top three exporter among non-food retail, it has now been overtaken by Health & Beauty, Electricals, and DIY & Gardening, making up three quarters of UK retail exports to the EU.

“A sharp fall in apparel exports since 2019 lays bare the potential competitive disadvantage from greater costs and delays competing in an export environment, if sellers do not have the expertise or resources in-house to navigate challenges posed in the new regulatory environment,” reads the report.

On top of the Brexit effect, it notes fashion brands and retailers have faced a weak consumer backdrop for non-essential spending since the cost-of-living crisis alongside the rising cost of doing business. While the value of non-food retail exports has fallen by almost 18% since 2019, despite hefty inflation softening the decline.

What’s caused the fall?

Additional trade frictions caused by Brexit-related complexities such as increased logistics costs, customs complexities, and regulatory hurdles, are curtailing international online retail opportunities for UK-based brands and retailers (worth an estimated £322.6bn to EU economies).

How are marketplaces bucking the trend?

One area that has benefitted is online marketplaces which have emerged as vital platforms for UK brands to regain ground in the lucrative European e-commerce market. Online marketplaces now account for at least £133bn (two-fifths) of EU e-commerce.

The report notes: “Marketplaces not only sell products, but also offer services to help sellers of all sizes, from major brands and retailers to individuals. This comes amid technological development and rising consumer expectations where ‘anything, anytime, anywhere’ is a mindset which often underpins behaviour.

“Today, shoppers unconsciously bounce between digital and physical channels throughout the entire customer journey (particularly younger digital natives). This can involve discovering new products on social media while browsing in-store, purchasing online for click-and-collect delivery, while seeking returns through drop-off points close to home. As such, customer journeys are now more complex with diverse customer expectations across different demographics.

“In this context, marketplaces play a key role in meeting consumer expectations. They provide convenient and personalised experiences, offer shoppers extended ranges, give them the ability to quickly compare products on a single platform, and serve relevant messaging which helps conversion.”

Marketplaces are ideal for younger, affluent spenders who are key drivers of consumer expenditure, the report suggests.

While middle-income groups prioritise the ease of access reflecting their stage in life, younger consumers are drawn to the diversity and brand selection available on these platforms.

Amid economic uncertainties, young and middle-aged spenders with more disposable income exhibit increased sensitivity to financial fluctuations, with nearly half expressing concern over inflation and interest rates. Such economic factors are likely to influence their future marketplace spending behaviours.

Tradebyte has identified three ways marketplaces can help fashion brands and retailers capture growth in a post-Brexit world.

Facilitating cross-border opportunities: Marketplaces serve as crucial channels for UK brands and retailers to expand internationally. They offer solutions for navigating complex logistics and regulations, provide localisation support, and enable strategic assortment differentiation.

Elevating digital experiences: Marketplaces play a pivotal role in enhancing digital experiences for both sellers and buyers, harnessing technology such as AI to add value and improve operations, thereby shaping the future of retail.

Central to the circular economy: Marketplaces are becoming central hubs for promoting recommerce and sustainability, driving innovation, and collaboration across the supply chain to support environmentally conscious consumer choices.

“Five years after Brexit, UK retailers are still navigating its long-term effects, particularly when it comes to trading with EU consumers. Many have experienced a significant drop in trade flows, making it harder to maintain connections with key European markets,” said Richard Lim, CEO, Retail Economics. 

He continued: “For brands looking to expand internationally, digital marketplaces have become an essential lifeline, providing a practical route to reach global audiences while overcoming complex trade barriers. By embracing these platforms, retailers can mitigate some of the challenges posed by Brexit and refocus on growth opportunities in an increasingly competitive global market.”

Alexander Otto, head of corporate relations at Tradebyte added: “Brexit has transformed the UK retail landscape, creating significant obstacles for UK brands and retailers aiming to expand in Europe, and making it far harder for them to tap into the flourishing EU e-commerce market. Online marketplaces now represent a platform for innovation and a scalable, low-risk path to reach affluent and younger EU consumers across a range of markets. They have emerged as crucial platforms to offset the challenges of Brexit and offer vital growth drivers in a competitive global market.”

 By Just Style