ASBCI chairman, Alistair Knox, discusses the plight of the UK clothing industry and potential post-Covid solutions.
The Covid-19 pandemic has had a devastating impact on the UK fashion and clothing sector. Mainstream consumer sales have slumped while demand for specialist PPE for the health sector has exploded internationally. The retail clothing industry has virtually closed down. Shops are shut, and many online operations are affected by the need to implement social distancing in warehouses. Meanwhile, the buyers and technologists who manage the supply processes are in lockdown, unable to travel.
The impact on supply chains is severe. These days, most bulk manufacturing takes place overseas, both for garment production and the textile industry that supplies the materials. An industry that was once a core part of the British economy is now 95% imports, and this transformation occurred in the last few decades of the twentieth century. A few up-market brands retain some UK manufacturing, as do some niche product producers and small brands, but the simple economics of labour-intensive clothing manufacture has largely driven buyers to predominately China and South Asia suppliers – the so-called pursuit of the cheap needle.
What does this mean for the industry in the post-pandemic world? Both ends of the supply chain are being impacted by this crisis and recovery will require some reassessment by the industry about how it sources and sells its products.
The retail sector is highly concentrated in the UK, with around 80% of clothing volume sold by fewer than 20 brands. This includes the major supermarket chains, as their clothing brands like George, F&F, Tu and Nutmeg compete with high street giants such as Next, Primark and M&S. Online sales had grown to more than 15% of the market before the crisis.
Pure-play e-retailers such as Asos and Boohoo can, in theory, continue as normal during this crisis. However, even their supply chains are being disrupted, with both factory and logistics affected by lockdowns around the world, and in reality all retailers are finding that lockdown not only eliminates the social pressures for buying new things, but many people also have less money to spend as a result of salary cuts or job losses. And we all have more clothes than actually need already. Most wardrobes contain clothes that have not been worn in over a year.
The collapse in demand has inevitably led to cancelled contracts. This, in turn, has closed factories. In the worst cases, as we have seen in Bangladesh, there is no other option for employees who have been laid off.
It seems inevitable that some brands and retailers will not survive. However, clothing is an essential as well as an emotional need so demand will pick up again in time. There may even be a period, as in the post-war years, when a bit of post-virus relief spills over into extra demand for clothing and display as full socialising resumes. Those buyers with good partnership suppliers are likely to recover fastest. Those countries with reliable control of public health will be the preferred sourcing areas for factories to use and visit.
In terms of future sourcing strategy, it is possible that UK buyers will re-assess the cost/risk balance of overseas versus UK production. After cost, time is the other major commercial pressure on fashion; the industry needs fast response. It may be that having onshore supply for maybe 5%-10% of our clothing would be a prudent insurance policy. This would not only mitigate against the possibility of total supply disruption in any future global shut-down but would also create a reservoir of skills and experience in the UK with respect to product and manufacturing technology.
Another option is near-sourcing - using more expensive labour in Eastern Europe or Mediterranean basin factories in exchange for shorter transit times, often just a few days. The ideal for ‘fast fashion’ is local production, and indeed there are some SMEs who operate on this basis in the UK.
A final thought about PPE and the NHS. When the next pandemic occurs, it would be nice to think that the NHS – and perhaps other public-facing businesses – will have an emergency stock of the necessary standard equipment, plus perhaps 10%-20% supply from British mass production factories. This would enable much more secure supply in a global emergency, as well as the machinery and skill base to upscale at pace when required. There would be some cost impact, but this could be limited by continuing to source 80%-90% of product where labour is cheap. Who knows, it might even be cheaper in the long run if it helps to avoid the additional costs of last-minute air freight such as emergency RAF flights from Turkey.
☛ Alistair Knox is chairman of the Association of Suppliers to the British Clothing Industry.