Keir Starmer has become the UK’s first Labour prime minister since Gordon Brown left Downing Street in 2010. “We did it! You campaigned for it; you fought for it; you voted for it; and now it has arrived, change begins now,” he said after his party’s victory in the UK general election.
“A changed Labour party ready to serve our country, ready to restore Britain to the service of working people.”
Will a Labour government deliver for the UK apparel industry?
The British Retail Consortium (BRC)'s chief executive Helen Dickinson is hopeful of finding ways to unlock apparel retail’s contributions to the UK and asserts it should be a “shared endeavour” between the new government and the retail industry.
She congratulates the Labour party on its success in the election and looks forward to “getting down to business” with a new government.
Dickinson highlights how important retail is as a source of employment and investment in the UK and through its scale and reach can make a “big contribution” to Labour’s policy goals.
The British Fashion Council (BFC) tells Just Style the first 200 days of this new government will hold the biggest opportunity to cement relationships and “discuss the industry, its priorities and start to educate new members of parliament (MPs) on the huge benefits that a successful fashion sector can bring to the UK,”.
It organisation also points out that due to the upcoming summer recess followed by the party political conference recess "not much law" will be made between now and October.
The BFC previously shared five key priorities to deliver opportunities for growth in the fashion sector: Reinstating tax-free shopping while reviewing business rates, trade and exports support, a commitment to Science, Technology, Engineering, Arts and Mathematics (STEAM), as opposed to STEM, which doesn't include the arts and providing skills to workers in the fashion industry and introducing sustainable legislation.
“Ideally, we’d like to see positive action on all of our five priorities, but these things take time, and we’re ready to invest in building that partnership,” says the BRC.
However, GlobalData questions to what extent Labour’s “stability” mantra is just a tactic designed to ensure electoral victory, after which a more radical approach might be unveiled.
A GlobalData report titled 'Global Political Drivers: 2024 UK election briefing,' highlights that labour will confront challenging taxation decisions, but major business tax cuts are unlikely. However, it seems committed to capping corporation tax at 25% and reforming business rates to “level the playing field” for small businesses through rate freezes and expanded relief thresholds.
“One of the biggest things Labour could do for apparel retailers is to reform business rates,” GlobalData retail analyst Neil Saunders tells Just Style. “This punishing tax harms a lot of businesses with physical shops.”
However, Saunders points out that despite the Labour Party’s pledge to “replace" the business rates system, it has provided "very few details" about what it will put in its place.
Dickinson echoes Saunders’ sentiments and argues that retail bears the disproportionate burden of business rates, contributing 22% of the total rates while accounting for 5% of the economy, blocking increased retail investment which she believes could “unlock growth” across the economy.
Yet the party’s proposed labour market changes may slightly increase costs for retailers and other businesses. Labour’s plans include boosting trade unions, raising minimum wages, prohibiting zero-hours contracts and “fire and rehire” practices and removing qualifying periods for benefits such as sick pay and parental leave.
This is expected to lead to higher expenses and less flexible workforce management, especially for roles typically using zero-hours contracts.
Labour’s campaign centred on creating a "pro-business, pro-worker" environment and even suggested a unique process of dealing with economic management in its manifesto called “securonomics” – an approach to strengthen economic foundations meaning a £1.8bn fund to upgrade ports and build supply chains across the UK in partnership with businesses, trade unions, local leaders, and devolved governments.
Labour has not specifically discussed plans for the apparel industry, however Saunders believes the party will want to look at ethics in the supply chain for the industry and adds: “It will likely be balanced in its approach as it will not want to place undue burdens on business.”
Labour does list tackling crime as a priority, but GlobalData sees its retail-specific pledges, such as removing the £200 shoplifting offence limit and creating a specific offence for assaulting retail workers, as “largely symbolic.”
The real impact on retail crime will depend more on its success in addressing court backlogs and implementing preventative crime measures, explains the report.
Dickinson tells Just Style she is keen to see the details of how these policies will be taken forward.
Labour has previously said it remains confident in the UK’s status outside of the EU but hopes to “make Brexit work” and deepen ties with Europe through an “improved and ambitious” relationship.
Saunders mentions any hope of joining the European Single Market is unlikely as the party would deem it too “politically sensitive,” but he suggests Labour may seek to smooth trade with the EU. But, he says: "Quite how this will be done remains to be seen".
Saunders adds that with trade, Labour is likely to push more free trade deals after already announcing it will seek arrangements with India which he believes could help imports of apparel.
GlobalData senior apparel analyst Pippa Stephens believes Labour’s attempts to strengthen the UK’s relationship with the EU should somewhat help “cross-border trading,” and aid lead times and tariffs, “though market access will still be considerably reduced post-Brexit,” she says.
What can retailers expect from a Labour government?
GlobalData retail analyst Oliver Maddison warns the retail sector won't be an immediate priority of the Starmer-led government.
“Of the retail-relevant policies set out in the Labour manifesto, the only one with a prescribed timeframe was a package of labour market reforms to be delivered in the first 100 days,” he says.
Although this would slightly increase labour costs in the not-too-distant future, he notes the remainder has no set timeline and was unlikely to have a significant effect until later in the Parliament. Maddison explains the non-specific structural reforms to business rates indicate that the policy detail is likely to be thrashed out once Labour enters government, backloading the implementation timeline.
Scott Parsons, chief operating officer UK of shopping centre operator Unibail-Rodamco-Westfield describes the election result is an exciting moment for the country and an opportunity to refresh the relationship between business and government and how they work together to deliver for communities.
When it comes to the retail sector, he has two top asks for the new Labour government.
He states: "The first is to do what no previous government has been able to achieve and reform business rates once and for all, and the second is to abolish tourist tax."
Parsons asserts tackling these issues effectively will not only help save our high streets but it will also unlock growth across the UK, allowing us to better compete on the global stage.
He continues: "Labour’s commitment to working with business leaders is refreshing and I invite our new Prime Minister and his team to meet with me on behalf of the hundreds of British and global retail brands at Westfield London and Westfield Stratford City to help turn both asks into a reality.”
The Labour manifesto reaffirms its intention to reform the apprenticeship levy into a “growth and skills levy,” to give companies more liberty to upskill their workforce, however no specific timeline is given.
“In such cases, retailers may be able to have greater input on the precise shape of policy outcomes through a greater scope for consulting with policymakers,” Maddison points out.
According to Stephens, this may also solve the fundamental problem of the skills gap as it would allow retailers to upskill colleagues throughout their careers, “aiding staff retention and helping them adapt to major changes in the industry such as the implementation of AI.”
With Labour’s plans to boost creative industries through apprenticeships and arts education, Stephens sees this as helping to increase the amount of talent filtering into the fashion industry.
Maddison imagines the effect of some of Labour’s policy agenda on retail will likely only begin to manifest much later, depending on its efficacy in achieving more structural goals.
Short-term outlook and impact on apparel consumer spending
Labour’s victory could see consumer confidence translate into more apparel retail spending.
Over a third (35.9%) of consumers expect to increase retail spending if Labour wins, according to GlobalData's recent 'UK Retail update Q2 2024' webinar with GlobalData’s retail research director Patrick O’Brien putting it down to “enthusiasm enthused by the future".
However, he warns that history shows a post-election boost could be short-lived as the “after-election” year tends to be worse than the year before it.
“Consumer confidence may be fairly high, but retail volumes have been shrinking,” says O’Brien. “The incoming Starmer government may be able to buck the trend, though he's unlikely to be pulling any rabbits out of hats to increase spending in a meaningful way.”
Maddison agrees and shares the effects of Labour's policy agenda on retail will likely "take time to come to fruition."
Labour’s victory and the UK's new government presents both opportunities and challenges for the apparel industry. However, the true impact will depend on how quickly and effectively its proposed policies are implemented, and how the industry and consumers adapt to the change that lie ahead.
