Brexit and the Licensing Business: One Man’s View

Posted by Kelvyn Gardner on June 27, 2016

Now that the EU membership campaign, and the election itself, is officially over, I reckon that it’s OK for me to go on the record with my personal view. I should qualify that by clarifying that these are my views, not necessarily those of LIMA as a whole, nor of the licensing industry as a whole. In regards to the latter, however, the one hundred-plus licensing folk who attended the discussion panel at Spring Fling in London in May were more-or-less unanimous in backing ‘Remain’.

Enough qualification; What do I think?

It’s bad for Britain, bad for Europe, bad for the USA, bad for importers, bad for exporters, bad for the licensing business and anyone else involved in consumer products. Lawyers will get to bill their clients for changing EU-issued standard licensing agreements, but that’s not much of a boost to the global economy.  As for the electorate, it’s an especially unpleasant irony that the under 40s (the demographic most likely to be spending heavily on licensed products like toys and apparel) voted overwhelmingly for remain, whist the over 60s voted leave.

Let’s start with an immediate consequence: the fall in value of the £ pound Sterling. A huge percentage of UK licensees manufacture overseas. They pay in US dollars in many places, in Euros for those closer to home. That means that, right now, after less than a week, they will be paying more for the goods they manufacture under license. There is little scope for their passing on the increase to trade and consumer. UK retailers already fight hard with suppliers to keep prices low, as the public has little appetite to go along with increases, and no retailer wants to lose volume or market share by giving up a right to claim at least pricing parity with their competitors. Many UK licensees are already under extreme pressure, and an erosion of margin is the last thing they need.

Were we not warned? Yes, we were, and some licensees may have hedged, but not all of them, and even those hedges are likely to be for six months, not for the two-years of the Brexit negotiation period. Did I say two years? Well, now the Brexit campaign, and our soon-to -be departed Prime Minister, are all saying that we don’t need to rush into this, let’s take our time before triggering the two-year process. But, for every delay, uncertainty flourishes. Like it or not – and I’ve never liked it – financial markets abhor uncertainty. Try borrowing more for short-term capital, or getting finance for expansion, and see how far you get. That is, if anyone is even thinking of expanding as we have no clue as to what Government we’ll have, or what their effective Brexit plan is. A new Government – and we’re not due a change for four years – means more uncertainty.

What of consumer confidence, upon which overall retail trade depends? Just over half the nation voted ‘leave’. Surely they’ll be buying crates of Prosecco and ship loads of bunting to mark the occasion? With campaign promises already being watered down in press and TV interviews, the contented may soon become the disillusioned.

Brexiters also tell us today that they are getting down to work to ‘devise the plan’ for Brexit. ‘They are getting down to work to ‘devise the plan’’?? Will this ever end? What were they thinking if they did not have a plan? We’ve also now got Scotland about to demand a fresh independence referendum, which will only go one way now that they voted, as a nation’ for ‘Remain’. Northern Ireland is also making similar noises.  Enjoying your UK license, licensees out there, or your UK representation rights, dear agents?  The ‘UK’ may soon mean just ‘England and Wales’ as another Brexit consequence.

 

Perhaps Disney, or Warner Brothers, or Turner, or Viacom, will move their European HQs to Paris or Berlin, to be at the heart of the EU, and not stay put in an isolated, and seemingly isolationist, small island off the coast? Will Brand Licensing Europe follow the same thinking? Just as it has become a truly Pan-European event, the UK withdraws from Europe. UK licensing jobs lost, access to these senior staffers made more difficult, costly and time-consuming.

The UK is being seen by our European neighbours as have stabbed them in the back. So much of the campaign was negative about European economies, and the people that make them work. The UK is voluntarily turning its back on the largest trading bloc in the world, and we’re expecting them to write a good trade agreement with us?

The UK will come through this, of course, but only after much unnecessary pain which is self-inflicted. There are no winners. On CNN on Friday morning I saw forlorn-looking Boris Johnson and Michael Gove, leaders of Brexit, and their expressions said one thing: what have we done?  Be careful what you wish for, they say – clearly these guys didn’t know this epithet.  Remain voters have already lost; leavers are not going to get what they voted for. Whatever Government emerges will have to clutch the poison chalice of negotiating literally thousands of pages of trade agreements and regulations which will be required to replace those of the EU which pertain today. Whatever political party has the task, they will be writing their own suicide note, as they will not be able to live up to promises made in the white-heat of a vitriolic campaign.

Who you gonna call? A combined team of UK licensing heroes, Sherlock, Thunderbirds, Harry Potter, Doctor Who, James Bond, Danger Mouse, Gandalf, Merlin,Lara Croft, Alice in Wonderland, Tank Girl, League of Extraordinary Gentlemen  and theentire Court of King Arthur and the Knights of the Round Table may just about be able to rescue us all from our fate.