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December 11, 2020

Preparing for 2021: The 9 Biggest Challenges Facing Our Industry Next Year

By: Peter Gregory

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2020 is finally drawing to a close and at long last we can start to get excited about 2021! With Covid-19 vaccines on the horizon, we’re all looking forward to a productive year next year. We’ve got a lot to look forward to in 2021, but there are definitely some challenges to prepare for, too.

We’ve been talking to our customers and suppliers about their concerns for the new year. Many of us still have questions about the long-term impact of Covid, Brexit and other challenges, but there are steps we can all take to get ready. 

In this article, we’ll share our list of the 9 most likely challenges we think we’ll face next year, and we’ll give you some pointers on how to prepare. Without further ado, let’s dive straight in…


Shipping Delays at Ports

Shipping delays are impacting a lot of UK-based manufacturing and distribution businesses at the moment. It’s a logistical problem that’s going to continue for at least the first few months of 2021. 

Before Covid-19 struck, almost every major international shipping port had a reasonable stockpile of empty shipping containers on hand. These big metal boxes would be filled in one port, unloaded at another port overseas, then refilled again and shipped back, and so on. When different countries started to shut down factories and distribution centres last year in response to Covid-19, this delicate and highly efficient global supply chain was thrown completely out of balance. Now, according to a recent report on BBC News, some global ports have too many shipping containers clogging up their docks, while other ports can’t ship goods out fast enough because they don’t have any empty containers available. 

This problem will sort itself out eventually, but if you’re reliant on imported textiles, or if you ship clothes overseas for finishing, then you could run into delays in the early part of next year. If you’re a small business, the best way to manage the risk of shipping delays is to get your orders in as soon as you can and try to have more stock on hand here in the UK than you might have done in previous years. 

And by the way, this is a problem we have already prepared for here at GB Labels HQ! The looms we rely on in SW Wales are well-stocked and ready to go, so we’re confident that we can honour our existing turnaround times in the New Year. 

New Taxes on EU Imports

If we find ourselves without a Brexit deal on 1 January 2021, then we’ll most likely have to pay new import taxes, and VAT, on any goods coming into the UK from suppliers in EU member states. These added customs costs could be as high as 32%, and they’re costs that have to be paid before you’ve sold anything (imported goods don’t get released from the port until all duties are paid). 

There’s not a lot that we can do about customs costs. The chances of a last-minute Brexit deal are slim, so small businesses have to be ready to pay these new import taxes. We still don’t know exactly how much these costs will be (and won’t find out until the last minute).

One thing we do know for sure is that UK-based businesses trading with Europe will need to be EORI-registered. If you can get your business EORI registered by the end of this year, you will at least be on the customs system, ready to trade, in time for 1 January 2021. To learn more, read our recent article: Selling to the EU in 2021

IR35 Legislation

If you work with a lot of freelancers, then the government’s new IR35 rules could potentially impact your business. The new IR35 rules are designed to close a tax loophole whereby some freelancers, who should really be classed as employees, invoice their employer as if they were a business to avoid paying full employment taxes. The IR35 rules were meant to kick in from April 2020, but the government delayed it by a year because of Coronavirus.

If you work with a freelancer (for instance an embroiderer, tailor or textiles buyer) and you suspect that your working relationship could be classed as an employer/employee relationship in all but name, then IR35 means that employment taxes may be due from April 2021 onwards. The Gov.uk web page on IR35 explains these new rules in detail – it also includes some handy online tools to help you figure out whether you need to take action.

Fewer Fashion Shows

Before 2020, trade shows were a vital part of how new fashion & apparel brands brought their goods to market. Most of our customers would have booked space at a number of fashion trade exhibitions every year so that they could meet face-to-face with buyers, show off their wares in ‘real life’ and try to win new distribution contracts. 

The British events industry has been completely flattened by lockdowns this year. A few fashion events went virtual and moved their exhibitions online, but most events were simply cancelled or postponed. Some shows are scheduled to return in 2021, but it’s still unclear how these are going to work. What’s more, the exhibitions industry is going to be nursing the wounds of a whole year of lost revenue for the foreseeable future. 

Our bet for 2021 is that we see fewer face-to-face trade events with more expensive exhibition space costs. For some of our clients this will mean picking a smaller list of trade shows to attend — for others it will make it impossible to attend any face-to-face events at all next year. 

Thankfully, events aren’t the only route to market — there are other ways to get your goods in front of buyers and grow your label. Just take a look at our Selling To Fashion Buyers During Lockdown article for more info!

Tougher Trading Terms From Retailers

We think there will be a resurgence in bricks-and-mortar clothing stores next year. Some clothes shopping trade has certainly moved online as a result of the pandemic, but there’s still nothing that can replicate the convenience and immediacy of in-store clothes shopping. Consumers will want to get out and about for a bit of retail therapy!

Many retailers and distributors are still nursing losses from 2020, and cash flow is tight. When bricks-and-mortar fashion stores reopen, we’re expecting it to take longer for bills to get paid. In fact, a few of our clients have already been asked for longer credit terms on next year’s invoices. This obviously puts pressure on fashion designers and apparel businesses, who have to stay afloat while they’re waiting for retailers and distributors to pay. If you’re concerned about cash flow next year, there are two things you should do as soon as possible:

  1. Approach your business bank and get an overdraft agreed up-front. Even if your business doesn’t dip into the red next year, the fact that you have an overdraft will offer you some level of protection against late payments. 
  2. Be up-front with the companies who are most likely to pay late. If they need more time to pay bills next year, agree on payment terms that work for both parties. 

If you take both of these steps and you still end up with a temporary cash flow issue, one option to look at is invoice factoring. With invoice factoring, you basically sell an unpaid invoice to a third party at a discount. The third party chases your client for the full value of the overdue invoice, and you get enough money into your account to keep trading in the short term. Invoice factoring is an expensive option which should really only be used as a last resort — it’s much better to communicate openly with your customers and address payment problems early, before they get out of hand. 

If you’d like to learn more about cash flow management, there’s some great advice on the CICM website

A Growing Appetite For Sustainable Goods

Shoppers in the UK are looking for sustainable products, and we’ve all got to do what we can as an industry to meet this demand. This is more than a passing trend — this is a long-term change in how the whole economy works — so the sooner you can address it the better. 

If you haven’t already, you should audit your whole business for sustainability. Look at every product you make and sell, then look at how you make and sell it. Your raw materials, your manufacturing process, your packaging, shipping methods, even the likelihood of your products being recycled at the end of their life — it should all feed into your sustainability plans for 2021

The great thing about sustainability is that we can all make a difference — it doesn’t matter how big or small our operation is. Just take a look at our article on sustainable packaging for some practical ideas!

A Wobbly Economy

There’s no question that this year’s pandemic took its toll on our economy. UK GDP figures have been very choppy, troughing and peaking at an unprecedented scale according to data from the Office for National Statistics. The same story is unfolding in countries all over the world.

Thankfully, government incentives like the furlough scheme have offered some level of protection to individuals this year, but we are by no means out of the woods. If Britain sees another recession next year, then people’s spending habits are going to change, and we need to be ready for this. 

I’ve navigated my fair share of recessions in my time. In my experience, the best defense against a recession is to focus on quality. When cash is tight, people appreciate high-quality goods that will last. The businesses that struggle tend to be the ones that compromise on materials and workmanship in an effort to save a few pennies. 

If things get tough, do everything in your power to make sure that your work is brilliant and that your customers are happy. It’s a strategy that works for us here at GB Labels in good times and bad — it will work for you too!

A New Global Trading Environment

Like it or loathe it, Brexit has redrawn the global trade map …and it doesn’t just impact our contracts with suppliers and customers in the EU. 

Some of the UK’s international trade deals that were drawn up when we were a member of the EU will no longer be valid on 1 January 2021, simply  because we are no longer an EU member state. The government are putting this right as quickly as they can (we have a UK / Canada trade deal, for instance), but there are still too many countries where we haven’t got a new agreement to replace the deal we’re losing. 

We could find it easier to sell into international markets in 2021, but any new trade deals are going to be a two-way street; countries we do deals with are going to want to sell into the UK, and we don’t know how that will impact the price of clothing and raw materials. 

Whatever happens next year, we all need to work hard to create exceptionally high-quality goods that can compete on the global stage!

Unseasonal Weather

Annual weather patterns are becoming more erratic here in Britain, and that has a huge impact on what retailers are buying at any given moment. 

According to the Met Office, we’re getting an increasing number of extreme weather events every year here in the UK. Summers are getting hotter and we’re seeing less snow and ice in the winter. The weather in spring and autumn is becoming less reliable, too.

Retailers are rightly cautious about buying in vast amounts of seasonal stock at the moment, and it’s not something that any of us can control. Our advice to customers is to avoid leaning too heavily on one particular season; where possible, try to diversify your range so that you can provide retailers with a range of clothes that will sell in any weather

Thanks For Reading!

2020 was an unusual year, but we’re nearly through it! With any luck, we’ll be able to consign coronavirus to the past in 2021.

The great thing about our industry is that nothing stays still for long —  there’s always a new trend, textile or style to send the whole industry off in a fresh direction. 

2021 will be another year full of surprises, but the clothing industry can adapt to whatever comes next. We always do!

Best Wishes,

Pete

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