Mr Smith was considered favourite for the award, which is to be announced next month during London Fashion Week. Jasper Conran, who won the award in 1986, has also requested that his nomination be withdrawn.
Their reluctance to participate has cast a shadow over the most prestigious event on the British fashion calendar. It also reopens a long-running debate over the best way to promote and encourage designers.
Mr Smith, who is on business in Italy, yesterday described the event, which is sponsored by Lloyds Bank, as 'self-congratulatory'. He said: 'We should be focusing our efforts on helping designers rather than patting ourselves on the back.'
Mr Smith said that the efforts and money ploughed into the event should be redirected. 'We need to teach manufacturers and management in our industry that design can make money and mean good business. We have a goldmine of talent in this country - the best fashion designers in the world - but this talent is being wasted.'
Mr Smith said that designers needed sound business advice rather than awards. 'There are too many designers starting out without proper backing, borrowing money from their mothers or making collections on Visa cards. They make wonderful clothes, but they make them badly and deliver them late.'
He added: 'I am not seeking personal publicity and I applaud Lloyds Bank for backing British fashion. But it happens that I feel passionately about this industry and want to see it applauded for professionalism and continuity and creativity rather than self-congratulatory events.'
Mr Smith's views carry weight if only because of the size of his business. He is the biggest-selling designer in British fashion with sales of pounds 54m forecast for 1992, although he has never won the award. The sales of the entire 'designer' industry are estimated at pounds 185m, with 60 per cent of companies recording sales of less than pounds 500,000 a year.
John Wilson, director of the British Fashion Council, which organises the awards, regretted the decision of both designers to withdraw.
He said: 'Why shouldn't we be self-congratulatory? The film and pop industries also stage their own awards. The event brings before the public a very important consumer industry and, we hope, sells a few more clothes at the end of the day.'
Mr Conran said yesterday that he regretted that his decision to withdraw had become public knowledge.
He described the criteria for determining the designer of the year as 'muddled and confused'. He said: 'The organisers have no clear vision of what the award is for, and what relationship it has to British industry.' Designers are privately critical of the inclusion of high street retailers and manufacturers in the list of nominees for other awards. Nominations for categories such as 'British Classics' and 'More Dash Than Cash' include Marks & Spencer, Pineapple, French Connection and Pink Soda.
Mr Wilson defended their inclusion. 'The awards are intended to give a complete picture of British fashion, with the designer of the year category representing the ultimate accolade. We are good at street fashion, at knitwear, at classic fashion, and they all merit inclusion.'
Recent months have witnessed the first signs of closer co-operation between designers and manufacturers.
Coats Viyella, Britain's largest textile company, has signed a five-year agreement to back Ally Capellino, a designer label. Courtaulds Textiles, another industry giant, has increased its stake in Arabella Pollen to 75 per cent.
Big-name sponsors have also become involved in London Fashion Week, impressed by public enthusiasm for the subject. Lloyds Bank is involved for the second year. Jaguar, the car manufacturer, is sponsoring the catwalk show of Caroline Charles which opens London Fashion Week on 9 October.
However, designers fear that it may be too little, too late. Paris and Milan continue to strengthen their grip on the European designer industry. London is perceived as a laboratory of ideas rather than a city where serious business is done.
Recent months have witnessed an exodus of British design talent to the continent. The list includes many former British designers of the year.
John Galliano, who won the award in 1987, is working with Amor, a French firm. Rifat Ozbek, who won in 1988, is manufactured in Italy by Aeffe. Workers for Freedom, who won in 1989, are emigrating to France this autumn and will show their collection in Paris in future. Even Vivienne Westwood, who has won for the last two years, is staging her catwalk shows in Paris.
The shortlist for this year's award now includes Mr Ozbek, Arabella Pollen, Catherine Walker, John Richmond, Nicole Farhi and Ms Westwood.
(Photographs omitted)Reuse content