When Marcel Ostertag, winner of this year's menswear award at the BA shows at elite design college Central Saint Martins, took to the catwalk as the final flourish in presenting his own collection, he did so in a leotard, a pair of black patent stilettos and corkscrew curls. It was all very creative, very London.
'These designers are the next Alexander, the next John, the next Phoebe and Stella,' gushed the host, comparing the future stars of British fashion with McQueen, Galliano, Philo and McCartney.
Yet creativity alone has failed to spell commercial success for UK fashion.
Tellingly, all four of these now-famous designers are working for French or Italian-owned businesses, even if two - McQueen and McCartney - are still based in London. Many of their contemporaries from the 1990s Cool Britannia boom are no longer even showing on the catwalk, their businesses having been scaled down or having ceased to trade altogether. So what is it about the British that means we have the creative skills for designer fashion but not the business acumen to reap the profits to go with it?
The figures tell their own story. If London fashion design remains something of a cottage industry, vast conglomerates of chateau-sized proportions are the norm in France. It is the leader in a worldwide luxury retail market whose worth is estimated at more than $160 billion, according to consultancy Euromonitor, a quarter of which is spent on clothing and accessories alone. With Americans and Italians literally sewing up most of the rest of the luxury market, Britain emerges as an uninspiring also-ran.
Looming above its competitors is French company Louis Vuitton Moet Hennessey (LVMH), which turns over £8 billion annually (including all non-fashion goods) and is owner of 13 fashion houses from Donna Karan to Christian Lacroix, as well as luxury brands that include Moet & Chandon and Tag Heuer. Behind it comes Gucci, with a turnover of £1.7 billion in 2003, and Polo Ralph Lauren, at £1.42 billion. Trailing the list are the UK's Burberry, at £676 million the biggest of the Brits, and Paul Smith, with annual sales of just £77 million.
Yet although the large luxury groups have advantages in terms of scale, organisation and access to investment, one thing they can't control is consumer taste. According to Anna Garner, head of fashion at Selfridges, a shift is taking place away from brands that have achieved mass-market status. Instead, consumers are seeking refuge in a few very expensive classic names, such as Louis Vuitton or Chanel, or are looking for more individual high fashion. 'What they want really is either true luxury or something that's reasonably exclusive.' Exciting niche fashion brands are something at which Britain excels, so could this be the opening they have been waiting for?
Perhaps. After all, Britain's designer fashion businesses are showing optimistic signs. A report last year for the Department of Trade & Industry showed a sector with a £700 million total turnover in 2001, of which £390 million was exported, and compound growth rates of over 20% a year over the 1990s.
Most inspiring has been the success of Burberry, turned around since 1997 by chief executive Rose Marie Bravo (see p42). The secret of Bravo's success lies in rigorous brand control, bringing in high-profile designers, buying back licences and opening new stores. The result has been sales up 200% and a rise in operating profits from £18.5 million to £136.6 million over the past four years.
Another Brit success is designer Paul Smith, who has built up his label to achieve annual turnover of £77 million, applying his mix of calculated British eccentricity and new twists on tailoring traditions.
To a great extent, Burberry's and Paul Smith's success has come from being more international and less British. Burberry, for instance, has an American CEO, sells between 85% and 90% of its goods overseas and shows its collections in Milan. Paul Smith, although so far still committed to London Fashion Week, manufactures only about a fifth of his ranges in the UK, the rest coming from Italy, Morocco and even China.
Scottish knitwear brand Pringle has also prospered by becoming more internationally orientated. Bought in 2000 by Hong Kong-based manufacturers Fang Brothers, it has since concentrated, like Burberry, on buying back licences and opening new stores. The effect shows on the top line, says chief executive Kim Winser, with sales up a third on last year. Like Paul Smith, it shows its womenswear in London but its menswear in Milan. Only a third of the £20 million a year sales now come from the UK.
Winser believes there are still advantages that British luxury brands can exploit. 'Our creativity is a major advantage because in luxury goods it's all about innovation,' she says. Allied to this, there remains an appreciation for things British. 'In certain parts of the world, there is a huge respect for British heritage. In America and Asia, they still love that history.'
If Burberry and Paul Smith are Britain's fashion flagships, the rest of its fleet is, by French and Italian standards, unimpressive in scale.
Other mid-sized British luxury businesses, such as Mulberry, famous for its leather bags and organisers, are currently loss-making, while few if any of the London Fashion Week designers make consistent profits or sales of over £10 million.
London Fashion Week, which by this February had effectively contracted to just four full days of shows, fails to attract the calibre of international buyers that would take it into the major league. 'We have lost our position in terms of the shows - the world doesn't want to come to them,' says Winser.
A problem is the diminutive size of the UK domestic designer market, estimated at a meagre £1.4 billion annually by consultancy Mintel. Undeterred, many in the industry are pushing forward with efforts to change Britain's fashion enterprise culture. David Jones has been a consultant for the past 22 years, helping designers from Karen Millen to Jasper Conran to set up their businesses.
He says that until recently lack of business training and advice for designers has hindered progress. And, ironically, sponsorship schemes, such as the New Generation Awards, that thrust young designers into the limelight have also been harmful. 'It takes five years to get yourself into a situation where you are confident that you are in charge of your business,' he says.
Wendy Dagworthy, head of school of fashion and textiles at London's influential Royal College of Art, agrees. 'The problem arises when young designers start too early. They think having a catwalk show will make their name,' she says. Instead, 'they should start gradually'.
Many believe Britain is simply producing too many fashion designers - about 3,000 a year - without the technical and commercial skills needed to work in the real world. Dagworthy emphasises that a business mind is as important as a creative one if businesses are to succeed. 'What you need is someone who will run the business for you,' she says. The designer should be able to focus on the product, while the business partner manages the commercial side.
Access to the right kind of manufacturing facilities may also hold British designers back. 'The production is the problem,' says Dagworthy, who believes there are not enough factories left in the UK to service British designers. Jones is running a project to address this: the idea is to convert factories in London, where up to 85% of UK fashion designers are based, from producing high volumes of low-cost, low-quality clothing to smaller quantities of higher-quality merchandise at higher price levels. Some 25 factories have already been converted, with as many to follow. High street collaboration can also help, whereby designers create a diffusion range for a UK store, and there was a spate of such tie-ups in the late 1990s. It is a marriage of convenience, offering designers lucrative consultancy work and allowing some of their glamour and distinctive identity to filter through into mainstream retailers' collections.
Designers from Jasper Conran to Matthew Williamson have been tempted into such deals. The result has been big business for some retailers, with Debenhams building sales of hundreds of millions of pounds on the back of it, while designer tie-ups have been crucial to the recent success of young fashion chain Top Shop.
Yet the high street can also harm small designers by imitating trends hot off the catwalks. 'It's devastating for the designers,' says Dagworthy.
If designer looks are available at a fraction of the designer price, consumers will eschew designer labels in favour of high street stores.
Access to financial backing may also be the problem for aspiring designers.
Linda Peters, director of the Centre for Fashion Enterprise and formerly vice-president of global strategy and business development at Sephora.com, part of the LVMH empire, aims to address this by creating a 'Silicon Valley for fashion'. From her office in the London College of Fashion, she is planning a cultural revolution - to get investors to look seriously at designer fashion as a money-making business. 'Our objective is to create a culture for investment in fashion in London - but that's a very big challenge,' she admits.
With about £2 million of Government funding, the Centre is looking to help create 15 new designer companies and to support another 15 existing ones over three years. 'It can be a very profitable investment, if you make the right pick,' says Peters. 'What we are trying to do is to lower the risk to potential investors by finding the ones we think are likely to be successful.'
But is throwing cash around really the answer? 'These people,' says Mark Advani, head of new investments at private equity firm Isis Equity Partners, which has backed deals including outdoor clothing brand Fatface, 'are artistically driven and work for more than just financial reward, whereas I am in it just for the money.'
In order for his company to be interested, he says, a fashion designer's business would have to be turning over a minimum of £7 million or £8 million annually. 'Most fashion businesses will make around 10% return on sales, and if you start with a turnover of £6 million, in order for me to make a return within a few years it is going to have to grow three-fold. How often do you find a sizeable upmarket business like that?'
There is also another, more fundamental problem. 'People like me don't get to see really upmarket fashion businesses. It says something about the ambition of the people running these companies that in the last 10 years, I can't think of a single upmarket fashion designer who has approached me with a business plan.'
If Advani is right, the business culture revolution that some would like to see in Britain's fashion designer businesses has a way to go.
ELEY KISHIMOTO - A PATTERN TO FOLLOW
From the heart of Brixton, Mark Eley and his wife Wakako Kishimoto run one of London's more successful emerging designer fashion businesses, Eley Kishimoto. According to Wendy Dagworthy, head of fashion and textiles at the Royal College of Art, the company exemplifies the sort of steady, serious approach that British designers should cultivate if they wish to grow and succeed.
The label's signature style is based on print. This autumn's collection featured everything from jungle themes to buffalo and antelope silhouettes and floral Liberty prints. Says Eley: 'We are surface decorators and the whole world's a surface.'
Eley and Kishimoto set up shop in 1992, after graduating in textile design.
Soon they were working on commissions for international designer houses, including Guy Laroche and Marc Jacobs. In 1996, EK launched an experimental collection of ready-to-wear clothing.
A full-scale collection followed in '98, which sold to department stores worldwide, with particular success in Japan. They learnt from the experiences of their London designer friends. 'What the majority of our friends used to fail in was taking orders, but never being able to fulfil them,' says Eley.
Finding the right price level was important, and the collection pitched lower than the priciest main collections to enable higher production volumes.
Wholesale prices range from about £18 for a T-shirt to £180 for a dress and £250 for a coat. Customers are likely to pay two and a half times those prices or more. Eight years on, 150 stockists, including Harvey Nichols and Liberty, sell the collection worldwide.
Last year, the first shop opened, which, says Eley, acts as a calling card: 'It's basically like a portfolio.' Growth has been between 10% and 25% each season, with annual turnover now at about £2 million. But fashion remains unpredictable. Two years ago, one manufacturer, responsible for producing 40% of the collection, went bankrupt a month before delivery. 'We managed to move to another manufacturer and we were about six days late,' says Eley. The experience led EK to rethink its approach; it has signed an agreement with Italian manufacturer CIT to produce the autumn 2004 collection and take on a full licensing deal from next spring. At present, EK's ready-to-wear clothing business is breaking even, while textiles remain profitable.
The business has grown with no outside investment. The only external assistance came from a deal with high street fashion chain New Look, now over, which sponsored EK's catwalk shows to the tune of £30,000 in return for an exclusive collection. As ever, the high street can be foe as well as friend, and EK suffers when instant rip-offs of its prints and designs appear on the high street. The big chains get away with it because they know that small boutiques such as EK are unlikely to have the money to sue.
Even so, the company's future plans are ambitious. It is contracted to produce a collection for sportswear brand Ellesse next spring and is set to launch into menswear. 'We are in no way as commercial as Paul Smith, for instance, because of the nature of the product that we put out there, but that's not saying that our diffusion lines in the future can't put us up into that area,' says Eley. 'Licensing, consultancy and diffusion are what create income. If the (clothing) mainline is breaking even and you've got these other things, then there are definitely profits to be had.'
BURBERRY - CLASSIC COMEBACK
Seven years ago, Burberry was a brand with a prestigious history but an uncertain future. Founded in 1856 by Thomas Burberry, it had become famous for its trenchcoats and trademark house check, but had all but run out of fashion inspiration. It was heavily dependent on a small number of core products, and its distribution and licensing were uncontrolled and inconsistent, giving it a downmarket image.
In 1997, parent retail group Great Universal Stores brought in a new management team, led by chief executive Rose Marie Bravo, formerly president of Saks Fifth Avenue; she was backed by designer Roberto Menichetti, poached from German fashion house Jil Sander.
A huge overhaul was required. Advertising and logos were reworked, a new high-fashion collection, Burberry Prorsum, was launched and the core Burberry London collection was revamped. Licensees and distribution partners were either bought out or had to renegotiate contracts. Stores were closed and new locations opened. The rest of the UK fashion industry held its breath, with the expectation that, like the attempted revivals of other classic British brands, it would falter, losing its old customers even as it failed to hit the right note with new ones.
The first stages did not run smoothly for Bravo. In 1998, the financial crisis in the Far East hit sales. The re-use of the house check, plastered initially over advertising, products and even the stores, was seen as overdone, and questions were asked about what Burberry would do as a follow-up. And in 2001 Menichetti, the brains behind Prorsum, left to be replaced by Gucci designer Christopher Bailey, temporarily rocking City confidence. But the fashion Jeremiahs gradually fell silent as results improved and profits headed in a steady upward direction, leading to a partial stock market flotation two years ago. The hammer blow that could have fallen - the departure of Bravo herself to head up Gucci - has failed to materialise (so far) and the luxury market worldwide is on the upturn.
Burberry's success has proved that, far from just being a hobby, British designer fashion can be a huge commercial hit in the right professional hands. Says Aaron Fischer, luxury goods analyst at investment bank Goldman Sachs: 'The group has succeeded in turning around the brand, drawing on its well-established reputation, while at the same time making it relevant to a much broader customer base and moving away from dependence on the trademark check fabric. This is leading to greater pricing power, which leads to value creation in the luxury goods sector.'
Kim Winser, chief executive of knitwear brand Pringle, four years into its own revival plan aimed at shedding its middle-aged golfer image, mentions a meeting with Bravo. 'I was talking to Rose Marie at an industry event one evening and remarked that everyone had been saying I was "doing a Burberry",' says Winser. Bravo replied that everyone had said she was "doing a Gucci".' That short exchange offers hope that British companies can successfully emulate the victories of others, and in turn be emulated as textbook studies of success.
BRITS IN FASHION
ANTONI & ALISON
Starting with T-shirts for clubbers in the 1990s , Antoni Burakowski and Alison Roberts have built up a full ready-to-wear and clothing collection. Their designs are often whimsical, with ironic styling of classic fabrics and witty use of slogans. They now have their own store, 220 stockists and a big following in Japan and Italy.
Seeing himself as Savile Row's saviour, menswear designer Boateng (above left) now runs four fashion lines, as well as holding the post of creative director for Givenchy Homme. His often quirky take on traditional tailoring has won him fans from Robbie Williams to Peter Mandelson. Since receivership in 1998, he has rebuilt his business, which now turns over £3.5 million a year.
High-tech is a constant theme of Koshino's collections, running from the fabrics to digital images used as prints. In addition to ready-to-wear clothing, Koshino (second left) also has two jeans collections - Yen Orange Label and Yen Red Label.
With more than 21 years in business under her belt, Jackson (third left), is one of the longest established names on the London catwalk, known for the wearable bohemianism of her collections. In the past, she has worked closely with Marks & Spencer as a consultant and as one of the designers of its Autograph ranges. She now has her own London store and a number of high-profile UK stockists.
One of the heavy-hitters in the London Fashion Week line-up, Farhi set up her label with Stephen Marks (of French Connection fame) in 1983. With eight stores in London and one in New York, she has now expanded into homewares and restaurants. Her signature style is one of softly tailored luxury.
Set up four years ago by textiles expert Alice Temperley (fourth left), her label has won a starry clientele, both in the UK and internationally, especially in the US. Her signature style is one of laid-back yet confident English elegance, with its feminine glamour and good fit. With 100 stockists, a shop in London and a sales loft in New York, she is now clocking up sales of around £1.3 million a year, up 180% on the year before.
The career of Westwood, fashion linchpin of the Punk movement, covers 34 years of feverish creativity, with themes ranging from bondage to piracy and royalty - but all uniquely British. She has four collections and stores in Milan and Moscow, as well as six in the UK. Sales are around £6 million annually.
Tanya Sarne and designer Amy Roberts (above right) have created a label known for its subtle glamour and romantic femininity. They have also astutely managed commercial spin-offs from jewellery and fragrances to leather accessories and sunglasses. Ghost now has 11 stores and annual sales of £6.5 million.