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Fashion victims Why do British design companies keep going bust?

Andrew Tuck
Friday 30 June 1995 23:02 BST
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Two weeks ago, fashion editors found in their morning post a letter from designer Helen Storey explaining that with "the greatest regret the company was unable to continue to trade", and apologising to creditors and suppliers for the financial implications. Because it was Helen Storey, a woman who has widespread respect, there was probably a pause for a moment of regret. It's unlikely that anyone would have been surprised.

This year alone several key fashion names have found themselves in rough waters, and in the past decade the litany of designers whose businesses have sunk has included John Galliano, Scott Crolla, Arabella Pollen, BodyMap and Richard James. Those with longer memories will recall that Barbara Hulanicki of Biba and Ossie Clark suffered the same fate. Why do British fashion companies keep falling apart at the seams?

Blame is commonly laid at the feet of the "men in suits" who refuse to see fashion as a long-term investment. It is true that, unlike those in Milan or Paris, investment houses in London have a sniffy attitude towards cutting-edge fashion. But Philip Mellor, senior analyst at financial information supplier Dun & Bradstreet, doesn't find this surprising. "Money is not as freely available as it was, so you need a much sounder plan to attract investment. It's just very hard in this sector to predict potential success." Since 40 per cent of all new businesses go bust in their first four years, it's no wonder that those in the volatile world of fashion have such a bad track record.

Yet there are problems that are particular to British fashion. One of them, unfortunately, is arrogance. Our fashion students, the best in the world, too often believe that they can run a business and design two collections a year on their own. Oh, and run a shop too.

Simon Ward, administrator for the British Fashion Council, agrees that too many designers run before they can walk. "If you trained as an accountant you wouldn't leave college and immediately start your own business. But you can't stop people from trying."

Those who do soon meet the cashflow problems that kill off most fashion companies. Up to six months before they show their collections, they have to start preparing for the big day. There are staff and premises to be paid for, expensive fabrics to be bought, PR firms to be hired. Then, even if the show goes well, it may be another six months before the clothes are delivered and retailers pay up. But even when they are completely penniless, designers have to start spending like crazy again to produce the year's second collection.

Backers might seem to offer relief from the financial pressures, but they can cause problems, too. In May 1993, Arabella Pollen, who made clothes for smart women, watched her company fold when her backers, Courtaulds, pulled the plug. What seemed like the perfect marriage ended in a messy divorce. Courtaulds blamed Pollen's demise on her failure to win accounts in Europe; Courtaulds' critics accused the company of expecting overnight success.

Some British designers do find backers with whom they can get on. Margaret Howell, who lost control of her business in the early Eighties, has subsequently enjoyed an 11-year relationship with the Japanese firm, Anglobal, which has allowed her business to boom overseas. And Ally Capellino has a fruitful relationship with the clothing manufacturer, Coats Viyella, which puts up money for shows, advertising and marketing.

And, despite the gloom, it's important to remember that, like flared trousers, insolvent designers do keep coming back. Helen Storey is unlikely to be an exception.

Andrew Tuck

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