British economy is being forecasted to enter in a mild recession first time after its strong growth phase since last recession in 2009. The changed socioeconomic scenario affected by ‘Brexit’ result of EU referendum and subsequent political changes is requiring all industrial sectors to rethink UK and its industrial sub sectors. Having a glorified history of textile manufacturing, till today British textile and clothing industry remains as a strong contributor to its economy. Pre and post ‘Brexit’ economic and political reforms are to have impact on this industry as well. Britain being world’s 15th largest textile manufacturing country and being one of the largest consumers of textile and clothing goods with yearly market size around 58 billion pound, this industry has huge impact on global T&C trade and manufacturing. And so, this issue of Textile Today is covering an in depth analysis of British T&C industry, its new trend and outlook.
Manufacturers are in dilemma in making strategies
Different economic indexes show a demand shortfall which is to affect all aspects of Britain. When service sector has started to face impacts of current reforms, the manufacturing sector is not being spared of it. On first week of August 2016 ‘The Independent’ has reported that the purchasing manufacturers’ index of UK shows first declining trend since 2009. The month-on-month decline in business activity was the largest observed since independent survey started in July 1996. However, the forthcoming days are not yet that clear as the country at the same time could increase its GDP by 0.6 percent by the second quarter of 2016.
The declining pound sterling has reached 1.29 on 15th of August from 1.55 against USD from one year back that means more than 20% fall in one year. This means higher payments for the imports and competitiveness gain by manufacturers. However as the country is going to reduce European migrant workers significantly in next two years, its textile and clothing manufacturing industry is to face shortage of workers. The cost of imported raw materials and wages will increase for them. All these are keeping British manufacturers in dilemma about their strategies in coming days.
Policies are likely to support domestic manufacturing
The indication of preserving ‘British pride’ started to come in visibility by ‘Brexit’ result in the poll. Now it is being more prominent that Britain will try to gain its manufacturing pride not only in high tech industries like aerospace it also to consider its glory of the textile industry. When a lot of policy changes are being drafted these days led by new Prime Minister Theresa May, it is very likely that the government is to provide policy support in terms of trade barriers and tariff barriers to help British manufacturers. Already many British manufacturers are demanding this support from government which is not going to be good news for countries like Bangladesh. However UK needs to expand and preserve its current work force in a changed scenario as 11 percent of its textile industry employees are European migrants.
Micro size fast fashion niche market to OEM manufacturing
Ongoing global happenings have made the apparel supply chains more uncertain and risky. Continuous trend of fashion being faster and quicker, the niche market of UK retail market is more likely to be catered by domestic manufacturers. Quick response and strength in quick design change adaptability is going to assist UK’s micro size clothing and footwear manufacturers to achieve more business. These companies are likely to get more advantages for being close to the market and more branding of ‘Made in Britain’.
Unlike other leading fashion brands, British brands are less international market dependent as seen in the figure 2. Lion share of revenue of top British fashion retailers come from British consumer spending. And so these companies are more dependent on policies around domestic market. Current happenings mainly the currency fall are likely to increase consumer spending on fashion goods hence it may cause reduction of overall domestic sales. This is to affect these brands business significantly.
Supply chain of these brands is mostly driven by international manufacturers from countries like China, Bangladesh and India. Higher cost of US dollar and Euro for them is likely to encourage them to plan more from the domestic manufacturers. Currently there is not many Original Equipment Manufacturer (OEM) or large ‘Prime’ manufacturer for them in the UK. But this changed market mechanism to encourage these brands to go for OEM partners or large ‘prime’ manufacturing base in UK which would be great shift for British textile and clothing manufacturing.
In mostly a price driven retail market the British companies will continue to face competitions from overseas manufacturers despite current happenings as mentioned above. Apart from scarcity of skilled work force unwillingness of young generation to join manufacturing will be challenging. High cost of energy and lack of investment in textile and clothing manufacturing will cause sufferings in the growth pattern.
European Union will remain as the biggest factor
EU is to remain as the biggest trade partner of UK even after Brexit. Around 50% of British export goes to EU. If tariff and non-tariff barriers are imposed on this zone, the British fashion industry will be affected. Many fashion business of UK have very close ties with suppliers and consumers of different EU countries. These businesses must not be disturbed for the stability of the sector.
However, as anti-globalization elements are gaining momentum in different western countries, supply chain formulas are likely to see remarkable changes. Very natural shifting trends of last 50 years could experience a shake in coming days. Textile manufacturing countries all around the world should keep hawk eye on these happenings. Slight delay and lethargy in policy making and market protection could affect countries like Bangladesh badly. Upcoming Brexit and corresponding changes in UK must have significant impact on textile and clothing manufacturing sectors of countries like Bangladesh.
- Repatriation of UK textiles manufacture, The Alliance Project Team, The Greater Manchester Combined Authority, January 2015.
- Trade Map, International Trade Center
- Oxford Economics 2016
- Planet Retail, 2015
- Different reports of ‘The independent’ and ‘The Guardian’.