Written Evidence submitted by the British Fashion Council (BFC) (SEI0021)

Summary

In line with the proposals of the Industrial Strategy, we would welcome the opportunity to work with government to develop strong, industry led proposals for the growth of the economy.  In light of Brexit, the industry led support in trade, export and investment is particularly important.  We would recommend that DIT becomes less delivery focused, allowing resources to be passed to industry, resulting in greater effectiveness and a bold step towards significantly increasing growth through exports.   The challenges and opportunities of Brexit bring these issues and views into even sharper focus.

Introduction

1. The British Fashion Council (BFC) is a not-for-profit organisation that aims to further the interests of the British fashion industry and its designer businesses by harnessing and sharing collective knowledge, experience and resources of the sector. Based in London and formed in 1983, the BFC is funded by industry patrons, commercial sponsors and the government including the Mayor of London, Department for International Trade (DIT) and the European Regional Development Fund. The BFC showcases the best of British fashion design to an international audience including press and buyers through London Fashion Week and London Fashion Week Men’s, its biannual showcase of womenswear and menswear respectively. Each season LONDON show ROOMs takes emerging designers to Paris giving them the opportunity to promote themselves overseas. The BFC also organises the Fashion Awards, the UK’s annual celebration of excellence within the industry and London Fashion Weekend, a biannual shopping event open to the public. Furthermore, the BFC helps designers at various stages of their businesses through its support initiatives.
2. UK Fashion and Textiles (UKFT) and the British Footwear Association (BFA) are membership organisations that work closely with the BFC and represent both fashion and the broader textiles and accessories industries.  They facilitate export funding to fashion/textile/accessories businesses through the DIT Trade Access Programme (TAP), which provides financial contributions to businesses wishing to show at international trade fairs. 
3. The fashion industry is a significant contributor to the British economy.  The industry as a whole contributes £28.1bn GBP, 880,000 jobs to the UK and its GVA contribution grew 4.7% last year compared to the economy’s 2.2%. 
4. The British fashion industry contributes the equivalent of 1.5% of the GDP to the UK. (Value of Fashion, Oxford Economics) The industry is heavily reliant on international trade, especially with Europe. The majority of our exports to non-EU markets, especially Japan and China, are commissioned as a result of attendance at key international trade shows and fashion weeks in the EU. All aspects of the supply chain depend on ease of trade, from the sourcing of materials and recruiting of highly specialised technicians, to placing orders with brands and large retailers and growing businesses.
5. At present, the EU is the UK’s largest export market for textiles and apparel and is a key source of business talent and production skills for many fashion businesses.  The USA continues to the main market for sales of high end designer fashion and we continue to be interested in growth markets such as China and South Korea. The European Union accounts for 74% of UK exports.  UK apparel and textile exports to the European Union have risen from £4.6bn in 2012 to £6.7bn in 2016. Within the space of five years, this represents an increase of £1.8billion or 36%. Textile performance has also been very good too. These have increased 9% from 2010 to stand at £1.8bn
6. The BFC currently receives £170,000 per year as a contribution towards our International Guest Programme at London Fashion Week and London Fashion Week Men’s (twice per year), which enables us to invite key fashion buyers and press to fashion week to support the growth of export orders, and four trade missions to Paris per year for men’s and womenswear, which is where key export sales are made.  The total cost to the BFC of running these initiatives is approximately £900,000, not including the in-kind support we get through reduced rate hotel rooms, demonstrating that there is significant additional industry support that is leveraged against the DIT funding. Return on Investment is 1:£120 for the International Guest Programme at London Fashion Week and 1:£50 at London Fashion Week Men’s.  ROI at the London show Rooms Paris is around 1:£25 reflecting that it is our younger designers that we support through that initiative.  These ROIs are increasing season-on-season.
7. The BFC is submitting evidence on behalf of the designer fashion industry, having collated the views of the industry through holding trade focused roundtables with representatives from the industry, and from experience of receiving funding from DIT.  The BFC’s response is aligned to that of UK Fashion & Textiles and the British Footwear Association, with whom we work closely to deliver industry representation and support.

What progress have International Trade and Investment (ITI, formerly UKTI) and UK Export Finance (UKEF) made on their performance since the Business, Innovation and Skills Committee finished work on its inquiry in 2016?

8. The previous inquiry indicated the flaws in the operating model of UKTI and expressed the view that the establishment of the DIT, as a new department, has a major opportunity to become fit for purpose.  The experience of our industry is that these improvements have not been made, indeed may even be worse than they were under UKTI.  Many of the issues identified in the original inquiry are reflected in our response below.

How has the absorption of UKTI into the new Department for International Trade affected its performance?

9. The formation of the new Department has not improved clarity on the strategy for export development in the UK, particularly by sector.   We have experienced continued changes to structure, processes, personnel and direction, which create uncertainty and no long-term certainty with funding, making it very difficult to plan our delivery of export activities.
10. The continued absence of strategy for our sector has resulted in ad hoc, unconnected activities across DIT, the foreign offices and the Great campaign.  The landscape of support is seen as confusing and difficult to access by those businesses that need it.  Hence why we believe this support should be devolved to industry, through trade associations, who understand their industries and can give specialist and relevant export advice.
11. Germany provides an excellent example of this in practice where industry engagement is key at every level from policymakers down to the local chamber of commerce.

Are the Department for International Trade's export and investment services fit for purpose and sufficiently resourced?

12. The Department’s services could be made more fit for purpose by being more closely aligned to industry requirements.  DIT has been set up to deliver industry facing activities themselves.  We believe that the Department resources could be more effectively deployed and achieve greater results by allowing trade associations/industry bodies to deliver more directly to their industries.
13. The in-market posts are key and are the strongest recourse for businesses to offer market intelligence and support in the local market.  Quality personnel in market are essential.  However our experience has been that in-market officers take decisions to create events or initiatives without consulting with industry, with events often ill-timed and ill thought through.  We are then asked to help support with getting companies to travel to that market or invitees to the event.  We are not resourced to respond to these requests.  If we could work more closely to a strategic plan with in-market officers we believe that much higher efficiency and results could be achieved.
14. Trade Challenge Partnerships is an example of lack of direction and wasted resources, through setting up of a costly exercise to cover what was essentially procurement.  The application processes was lengthy and intensive for both DIT and those trade associations wishing to apply, which wasted resources both in DIT (UKTI) and those bodies, which could have been used to support industries.
15. Clarity around how the Key Markets are chosen would allow us to focus on markets that add value rather than industries influences behaviour and investment decisions, and has resulted in many missed opportunities for our industry.
16. The funding to attend international trade shows is seen as a great tool for exporters, however a marketing fee is deducted for DIT to produce marketing materials and assets that are not necessarily the best quality, most effective, appealing or relevant to promote those designers that have attended the show.
17. The Great Campaign has its merits; success could be attributed to co-ordinate activity in China.  However as Embassy led activity is all branded Great and industries aren’t necessarily notified of industry led activity in local market.  Visibility around where Fashion if Great has been and is being used as a specific campaign, including outdoor, print, event, partnerships would improve opportunity to add value.  Great has better resonance in markets such as China and Japan.  We have seen resistance to engaging in the campaign by some retailers in US, although no resistance to engaging in promoting British fashion.  Fashion is often used for not only commercial gain, but for soft power in markets as a way to engage luxury group, investment firms, technology companies, property groups and HNW individuals.  The output of these kind of events aren’t necessarily captured as wins for the fashion industry as well as others.

In the light of the Secretary of State's admission that £1 trillion export target will not be met, are the Department's export and investment targets transparent, appropriate and achievable?

18. Targets drive behaviour in terms of investment decisions by DIT, delivery by DIT officers and projects then delivered by partners.  The £1Tril target has resulted in skewed DIT investment decisions: supporting more mature businesses that will achieve higher export sales at the expense of helping to support young growth businesses that currently achieve lower export sales but have the potential to be the high growth high volume exporters of the future. 
19. Particular issues:

• Targets are not transparent, with little clarity on what would be deemed a suitable ROI for DIT funding, despite requests for this
• Care should be taken to ensure that the Export Wins declared are in fact directly attributable to DIT funding and recognise the private sector investment that was necessary to achieve them.
• The definitions of Export Wins were very late in being given to us, which caused problems in data collection.  Further issues arose when we were trying to collect the data as DIT staff were unable to clearly articulate was the definition is of “exports”
• The mechanism to report the Export Wins is problematic: declaring sales is highly commercially sensitive, most of our businesses don’t understand the questions being asked and then are confused when they receive an automated verification email from someone that they have never met (as the funding has come via us)
• Export Wins being asked for that do not directly relate to support given by DIT.

In the light of the Secretary of State's admission that £1 trillion export target will not be met, are the Department's export and investment targets transparent, appropriate and achievable?

20. Export sales will continue to be a good measure, however alongside other measures to ensure it doesn’t unduly affect behavior to certain activities, and providing that there is clearer definition to businesses and better communication to gather the evidence.  Figures declared should be directly attributable to the support given by DIT.

21. A measure to demonstrate support to growing businesses would be recommended, for example percentage increase in export sales or number of new markets entered by each company

What standard of advice do ITI and its International Trade Advisers provide?

22. International Trade Advisers services continue to be patchy, mainly because they are in fact removed from the industries that they are supposed to represent, with examples of many giving incorrect advice.  Our experience is that the ITAs for our industries don’t fully communicate with us, again allowing little opportunity to shape the relevance and timing of their support and events to fully support our businesses.
23. Businesses still value face to face specialist support to guide them through the technicalities of exporting that are particular to their business.  Staff within organisations such as industry bodies and trade associations are equipped to give more detailed advice.
24. Our fashion lead at DIT HQ wants to meet with companies but is not equipped to actually give them export advice. 

What standard of support does UK Export Finance provide to companies seeking to export?

25. We were unable to gather specific evidence in relation to UK Export Finance within the time given to respond to this consultation, however we would encourage the government to continue the important support of financing for export.  Further promotion of this service, again through trade associations and industry bodies, would make businesses more aware of this support.

March 2017