As the UK leaves the European Union, Drapers examines the potential opportunities for UK manufacturing
After more than three years of back-room wrangling, false starts and missed deadlines, the UK finally left the European Union on 31 January, entering a transition period that will last until the end of the year.
There have long been questions about whether the looming departure could spark a revival of the UK manufacturing industry, as possible tariffs, logistical hurdles and currency swings encourage brands to source product closer to home. On the flip side, however, are the challenges of higher costs, lower capacity and the skills gap in the UK.
Pros and cons
The industry would certainly welcome a Brexit boost. Production in the UK was dealt a blow when Clarks closed its state-of-the-art Somerset factory in March 2019. Open for less than a year, the footwear retailer originally had ambitious plans to make 300,000 pairs of its desert boots at the facility, but later admitted it had failed to reach production and cost targets.
Manufacturing output in the UK at the end of last year tumbled at the fastest rate since the 2008 financial crisis, a Confederation of British Industrysurvey of 289 manufacturers from all sectors showed. “Lacklustre” performance from the sector also contributed to sluggish economic growth in the three months to November 2019, the Office for National Statistics found.
However, this is not a sector without opportunity. UK Fashion and Textile Association (UKFT) figures show the UK exports £9.7bn of clothing and textiles a year.
There are a whole range of issues that could affect whether UK manufacturing is better off after Brexit
Adam Mansell UKFT
The fate of UK manufacturing after Brexit is a complex issue. Adam Mansell, CEO of the UKFT, stresses that the most significant moment for the sector will come when it finally learns the details of any post-Brexit trade deals. The clock is ticking on the 31 December deadline to thrash out all the terms of the UK’s departure, from the multi-billion-pound “divorce settlement” to immigration rules, safety standards and trading terms.
“There are a whole range of issues that could affect whether UK manufacturing is better off after Brexit, most of which we won’t know until any trade deals are agreed,” says Mansell. “For instance, [tariffs] could mean that bringing certain fabric into the UK becomes prohibitively expensive and [textile] factories here broaden the range of fabrics they have on offer, which could be an opportunity. However, if UK exports are hit with tariffs, it is likely UK manufacturing won’t do so well.”
He adds that the best-case scenario trade deal for UK manufacturing would be zero import and export tariffs: “We have to balance the needs of manufacturers against those of retailers and consumers. If we were being protectionist, we could say, ‘Slap tariffs on [imports],’ but that isn’t realistic in today’s global market.
“If we’re able to secure good trade deals with countries such as Japan or Korea, there’s a possibility they could consider the UK market for manufacturing because of its reputation for quality.”
It’s all very well saying there is potential business with the rest of the world, but no one would want to swap existing trade for potential trade
David Collinge, John Spencer
David Collinge is the managing director of Burnley-based textile mill John Spencer. He agrees that there is still much to be determined before the sector will know if Brexit brings opportunity: “Fluctuations in the exchange rate are likely, and any currency changes impact prices of our raw materials, 95% of which are imported. However, if the currency deteriorates, then our exports will become more competitive and it would make sense for us to concentrate on our exports business, which is currently only around 15% to 20% of sales.
“We’d like to keep as tight a relationship as possible with the EU because that’s where the biggest markets are. It’s all very well saying there is potential business with the rest of the world, but no one would want to swap existing trade for potential trade.”
There are more concrete growth opportunities for the sector than the effects of Brexit, experts tell Drapers. “Significant” demand is currently coming from smaller brands and start-ups looking for sustainable production on their doorsteps, Mansell explains, as well as from the fast fashion players.
One area of opportunity is demand for near sourcing from retailers seeking to reduce lead times. Ash Siddique, co-founder and managing director of fast fashion womenswear etailer Missy Empire, told Drapers last year that it “is building its [manufacturing] base in the UK”. Half of Missy Empire’s stock is now sourced from the UK, driven by currency headwinds making international suppliers too expensive. Fellow fast fashion etailer Missguided sources around 30% of its product from the UK, and Boohoo also sources product on these shores.
However, the fast fashion opportunity is only valuable to the UK manufacturing industry if workers are treated and paid fairly, and there have been concerns about working conditions in the Leicestershire garment industry.
“If fast fashion manufacturing is done in an ethical, sustainable way, then it is a good for UK manufacturing,” adds Mansell. “However, it cannot come at a cost to workers.”
Another opportunity for the UK textile industry lies in harnessing demand for ethically and sustainably produced fashion.
“The last six months were probably our strongest ever,” says John Spencer’s Collinge. “We’ve been able to trade off the fact that we produce in the UK, we use natural fibres and we’re the only organic weaving mill in the UK. We have very strong environmental credentials and that ticks all the boxes in terms of what customers are currently looking for.”
Others argue that the future lies in retailers and brands opening their own facilities. UK manufacturing is hamstrung by limited capacity – if the high street were to decide to onshore significant proportions of production, the industry would be unable to meet demand. Brands and retailers building their own factories would inject fresh life into the sector.
Clarks’ decision to close its factory shows that taking this approach is not a guaranteed success, but a handful of businesses are doing so. Premium knitwear brand Country of Origin, for example, opened a 7,000 sq ft factory in Leicester early last year. One of the few vertical fashion businesses in the UK, womenswear retailer David Nieper opened its fifth factory in the UK last year.
“It isn’t as simple as retailers placing an order with a UK factory, rather than a factory in China, because the UK factory [no longer exists],” managing director Christopher Nieper tells Drapers. “Traditionally, retailers sell things to the consumer but rarely make them, and manufacturers make things but don’t sell them. The internet means that manufacturers can and do sell things directly to consumers, which is a threat to retailers. Some of the benefits of having your own production are short runs, being agile and the ability to have the capacity to do what you want at the right time for you. If we want the factory to make all trousers, or all dresses, or change the pattern, we can.”
Kate Hills, founder of campaign and trade show Make It British, adds: “The main issue UK manufacturing faces is the capacity limit. It’s really exciting to see more brands opening their own factories. Smaller brands are doing this because being in charge of your production and making it locally is the quickest way to manufacture, it gives you more control and you don’t get bumped back in the queue if someone bigger comes along. There’s also the sustainability angle – if you make locally, you reduce your carbon footprint.”
Simon Middleton is the co-founder and managing director of clothing label Blackshore. Around half of its products are made at the brand’s shop and workshop in Southwold, Suffolk, which is home to a sewing and cutting room where customers can see garments being made. The other half is sourced from other UK manufacturers and it also sells other clothing brands that manufacture in the UK, such as Gloverall and Peregrine. He tells Drapers that by producing in the UK “we’re on the right side of shifts in the apparel sector”.
He explains: “Producing in the UK gives us a clear story, which in my view is the key to building a strong brand. UK manufacturing means we’re aligned with the current demand for sustainability. Everyone is talking about the decline of the high street and how to reinvigorate it. High streets need to be more than a row of shops, there needs to be some theatre, something happening. By also making in our shop, we’re delivering that.”
Whether Brexit can deliver tangible benefits for the UK manufacturing sector has yet to be determined. More than three years since the fateful EU referendum, there is still much to be decided. What is clear, however, is that there are opportunities for the sector to seize in sustainable manufacturing and demand for near-shoring.