On 24 June 2016, Freddie Elborne was fielding calls from his Italian suppliers. They had one question: ‘Freddie, what have you guys done?’
Elborne was at a loss for an answer. Like many Londoners in the weeks running up to the EU referendum, he assumed the remain vote was a shoo-in.
He set up his sunglasses brand Monc at the start of that year, striking a deal with an Italian manufacturer to make his frames.
The prospect of leaving the EU wasn’t something he had actually considered a realistic eventuality.
The unexpected result threw up an immediate problem. The bill for Monc’s first batch of frames – quoted in euros – was due in July. And because the pound had plummeted in value after the vote, that bill was suddenly £5,000 more expensive.
‘I was confident we’d be staying and the currency would get stronger,’ Elborne says. He added that luckily margins in the eyewear industry tend to be wide enough to manage fluctuations in currency.
Like other luxury fashion products, eyewear has a decent profit margin when sold direct to the consumer. On average across the industry 60% of the retail value for a pair of designer frames is profit.
For the time being, Elborne has decided to absorb the hit himself instead of passing the increase on to customers.
But if the pound continues to decline in value against the euro – as well as other currencies – UK businesses reliant on overseas manufacturers could see supply costs rack up and face no other option than to increase prices or try to cut outgoings in materials or marketing.
Other UK spectacles businesses have reported the cost of manufacturing abroad has already increased by as much as 20% as a result of the changes in currency.
Elborne has had to work harder to push his manufacturing partner to cut a better deal. ‘At the end of the day, I’m not their biggest customer,’ he says. ‘Trying to convince them I’m going to become a bigger brand is the only way to do it.’
The compromise has been to cut the number of frames in its range.
From Monc’s first order of five frame styles with up to seven colour variations each, it now produces four frame styles in order to reduce production costs. ‘It’s difficult to expand my portfolio because of this price change,’ Elborne admits.
Ditching the Italian manufacturer and finding a UK-based one isn’t an option.
Elborne says it took about a year to find a manufacturer that was happy to take on small orders and meet his standards of quality. The company initially produced 1,100 frames, with replenishment orders typically around 200 units.
And while he’s looked in the UK, he says he hasn’t found any factories that can compete on the Italian’s quality and price. ‘There’s one or two in London, but they’re unbelievably exclusive and they only make for themselves,’ Elborne claims.
Elborne is hoping as the business grows, Monc can drag its margins back up. Meanwhile, the pound has continued to lose value against the euro.
And as the UK approaches its 2019 deadline for Brexit, there are extra concerns Italian-made luxury goods could have huge tariffs slapped on them.
‘We’re now in a waiting game alongside every other UK brand that imports products [from the EU],’ Elborne explains. ‘We’ll always be investigating production on UK shores, as it’s been a goal of mine from the start, but a large change in tariffs might urge us to approach this goal sooner.’