Lenders need to understand the nature of creative industries and support their potential for economic growth
After her debut at this year’s London Fashion Week and a successful pop-up venture in New York, Charli Cohen’s luxury sportswear brand has the makings of a British fashion winner.
Three years since starting her company with fabric supplies and a mentoring package donated by Lycra, she has an annual turnover of more than £100,000 and a thriving export business that accounts for more than two thirds of her sales.
But like many young entrepreneurs working in fashion and other creative industries, Charli, 25, from Reigate, Surrey, has tackled some tough funding challenges on the road to commercial success.
“British designers are amazingly creative, but it’s hard getting investment for projects where making samples, taking orders, manufacturing a collection and getting paid by stores with 90-day terms can take up to a year,” she says. “Bank funding was never an option.”
Britain’s creative industries account for £36 million of gross value added, around 10 per cent of exports and 1.5 million jobs
Instead, Charli has pursued a range of alternative finance routes. She secured a £9,000 government startup loan and raised around £30,000 on Kickstarter, the crowdfunding website. She secured sponsorship for her London Fashion Week collection from soya milk manufacturer Alpro and fashion app The Edit.
“The sponsorship worked because brands want the profile that comes with being linked to young designers,” she says. “But it would be helpful for fashion startups to have access to a factoring service to fund cash flow. Most existing providers won’t even look at very small businesses.”
Britain’s creative industries, from fashion to music, animation, film, broadcast and video gaming, make a vital contribution to the national economy. Official statistics show they account for £36 million of gross value added, around 10 per cent of exports and 1.5 million jobs. Orders worth more than £100 million were placed during London Fashion Week 2015, according to the British Fashion Council, while viewers in 196 countries watched catwalk shows via live streaming.
But business agencies, lenders and financial advisers must take steps to secure the creative sector’s future growth amid increasing global competition, employers’ group, the CBI, warns. For example, more than 40 per cent of jobs in Britain’s gaming sector moved overseas between 2008 and 2011 after companies were lured abroad by generous tax breaks.
“These firms are huge contributors to the economy,” says Tom Thackray, head of enterprise at the CBI. “If we want a private sector-led recovery then our creative businesses are a great opportunity to secure that growth, and export British goods and services to the world.”
Britain’s fashion and creative industries are defined by collaboration and inclusiveness thanks to a history of international trading and a stable multicultural population. Their international influence is magnified by London’s reputation as a leading financial centre and a global tourism destination, attracting new visitors and potential trading partners every year, according to Mr Thackray. “British creativity has a reputation for flair and quality, and our language helps us reach a global audience,” he says.
Last year the Creative Industries Council (CIC), a joint initiative between business and government, launched Create UK, a strategy for promoting growth and development across the sector by doubling exports to £31 billion by 2020 and ensuring more startups survive beyond their first year. The initiative aims to support fledgling firms by providing information about alternative funding sources and advice on how to present a business case to potential investors.
There are also plans to assist banks and advisers by providing market intelligence to help assess ventures whose main assets are intellectual property that is often not patented.
“It is important to make free business and financial mentoring available to fashion graduates, and to demystify business planning, the basics of starting a business and the support available,” says Caroline Rush, chief executive of the Fashion Council and a member of the CIC.
Create UK has called on the British Business Bank to drive forward these measures by co-ordinating sources of information and advice, administering finance schemes and developing new funding platforms, including the provision of asset finance.
“We would like to see the Business Bank take more initiative to fill the gap and signpost alternative sources of finance,” the CBI’s Mr Thackray says.
Lenders should make it their business to understand that fashion and other creative businesses are not like other sectors
Wendy Malem, director of the Centre for Fashion Enterprise, a London-based incubator that offers advice, premises and funding to promising ventures, recognises the financial challenges facing young fashion entrepreneurs, from escalating business rates to a lack of project-based funding.
“Lenders should make it their business to understand that fashion and other creative businesses are not like other sectors. It takes five years to build an identity. They have an order book, but they need the money to fund the production,” she says.
At the moment, many fledgling fashion firms are funding growth with a mixture of industry awards, loans and sponsorship. Take Holly Jayne Smith, 24, who won a £1,000 British Council award for her womenswear collection at Graduate Fashion Week, the annual showcase for design students. Now she is working on the collection she recently presented at London Fashion Week in studios provided by Birmingham City University.
“There is help available from the industry, but I have wanted to steer clear of banks because I can’t forecast what I’ll be doing next year,” she says.
Mark Newton-Jones, Mothercare chief executive and chairman of Graduate Fashion Week, says young entrepreneurs who showcase at the event need more support to translate ideas into profit. “Graduate Fashion Week attracts 30,000 visitors and has launched famous names such as Stella McCartney and Julien Macdonald. But it is a charity and gets no support from the government. Britain has a great talent for fashion and we need more help to provide mentoring,” he says.
With the right support, British fashion entrepreneurs can drive economic growth, according to Ms Malem. “The key thing is finding the golden balance between commercialism and creativity,” she concludes.