New prime minister Boris Johnson is preparing the nation to leave the European Union with or without a deal on 31 October. Drapers examines the challenges and opportunities for UK manufacturing.
It has been buffeted by production moving to Asia, weathered the uncertainty of the UK’s trading future as a result of Brexit, and has a skills shortage that is hampering growth. Yet despite these headwinds, some UK manufacturers believe leaving the European Union may jumpstart a revival of the industry, as tariffs and trading logistics could force retailers and brands to source product closer to home.
New prime minister Boris Johnson has reshaped his cabinet and seems set on bringing the UK out of the European Union on 31 October whether the UK has agreed a deal with the trading bloc or not.
The key issue keeping many manufacturers awake at night is the impact of tariffs under any no-deal scenario, explains Adam Mansell, chief executive of UK Fashion and Textile Association (UKFT): “[Under World Trade Organization rules that would apply in the event of no deal] our UK textile manufacturers would, for example, be faced with an 8% tariff when selling worsted fabric into Italy, but an Italian manufacturer selling the same product into the UK would be able to import it duty free.”
Figures supplied by the UKFT show the UK exports £9.7bn of clothing and textiles a year – a 66% increase in 10 years – of which 76% goes to the EU. UKFT estimates that clothing and textiles the UK exports to the EU will be subject to £750m in tariffs.
Mansell says Turkey in particular is a concern: “It is our third-largest supplier of clothing at £1.4bn per year, and the sixth-largest supplier of textiles, totalling £391m per year.
“We have done some initial analysis on the impact of the potential UK tariff regime in a no-deal scenario and the financial cost for imports from Turkey would be in the region of £170m a year.”
Whenever you buffer stocks and bring forward production, it all costs a lot of money
Chief operating officer of a footwear manufacturer
The chief operating officer of one footwear manufacturer says the delay of Brexit had been costly to manufacturers and retailers alike across the UK: “We prepared for no deal at the end of March. People built stocks of raw materials and finished products to buffer themselves for any disruption. I guess we’ll do that all over again. We have no choice but to make sure the supply chain is uninhibited, but we could all do without this.
“Whenever you buffer stocks and bring forward production, it all costs a lot of money: you have more money tied up in stock and you are spending money on things you don’t yet need because you’re worried it might run out later. The truth is we now need clarity.”
The skills shortage in the UK has long been an issue for UK manufacturers, and could be perpetuated by Brexit, as skilled workers, including production or sample machinists, typically earn below the proposed £30,000 minimum salary requirement for EU citizens seeking UK visas.
“Garment manufacturers have been able to rely on access to skilled workers from the EU, but with the proposed new visa arrangements that talent pool will no longer be accessible,” says Mansell. “UKFT and partners have been working hard to develop new apprenticeship programmes and to highlight the positive careers available in manufacturing, but developing a pool of home-grown manufacturing talent will take a long time.”
The prospect of crashing out of the EU with no deal may feel like the nightmare scenario for many.
However, James Eden, owner of Salford-based Private White VC, believes UK manufacturers can still thrive even if there are some new barriers to trade: “Private White VC’s biggest export market is the US,” he argues. “Is Brexit going to impact our trade to the US? I don’t think so.
We need to look at the opportunities and not let Brexit hold us back
Mikha Mekler, Raeburn Design
“We have a buoyant business with Germany and Scandinavia. Will there be more paperwork? Yes, but at the same time we sell to Japan, Switzerland, the US and Korea, which is about as complicated as it gets [in terms of tariffs and customs]”.
Mikha Mekler, production manager at London Fashion Week brand Raeburn, which produces in London, believes UK manufacturers can thrive if they can find their niche: “Politics and the economy are not as closely linked as they used to be. Brexit, whether ‘hard’ or not, will force us to act as a business. We need to look at the opportunities and not let Brexit hold us back.
“I don’t see the UK as a place where we have hundreds of factories working on mass production, but more smaller labels and medium-sized businesses that specialise [in particular areas] could work.”
Speed to market
Increased speed to market and a growing trend towards sustainable, ethically produced product could prove a key element to the revival of British fashion and footwear manufacturing.
Jenny Holloway, owner of London-based factory Fashion Enter, says she had seen a jump in interest from UK retailers in 2019: “We have so many more enquiries from big retailers. This time last year we were [supplying only] Asos. Now we are working with Tesco, M&Co, and Fred Olsen. We have gone from supplying one retailer to five and have three more who may want to work with us. It gives us the ability to grow and forecast cashflow.”
She adds that smaller production runs on shorter lead times are in demand as retailers strive to be more reactive to the market: “A lot more people are trialling 200 or 300 garments and then will repeat with 1,000. Four years ago, a typical order would be 5,000 units. Now it is 800, but they want it in two weeks. This means the fabrics needs to come from Leicester and there is a circular economy of buying locally, making and distributing locally and it is working.
“The days of flying over to China to do quality checks – with the flights and carbon footprint on emissions – to put down a £5,000 order [are numbered].”
A season these days can be as short as 15 weeks, and you can’t afford long production times
Footwear brand MD
The managing director of one made-in-Britain footwear brand agrees there has been a shift in perception both in terms of sustainable sourcing and time, which has worked against suppliers in Asia: “Speed to market is becoming more and more important and two things are driving it. Risk aversion to getting it wrong has reduced lead times, as the shorter the lead time the more likely you will have the right product at the right place at the right time.
“Another factor is proximity to market. Sea freight takes four or five weeks in transport alone. A season these days can be as short as 15 weeks, and, in these cases, you can’t afford long production times.”
Raeburn’s Mekler believes the UK can lead the way in the adoption of new fabrics and production techniques that could drive new export opportunities and boost the UK’s sustainable credentials: “Through innovation we have new materials such as leather from mushrooms, and with new factories we can invest in innovation and follow through with production. At the moment it is hard for the UK to beat places such as Portugal on quality, but if we start producing innovative materials, we can export them.”
There are less than 100 days until prime minister Johnson takes the UK out of the EU, and many of the impacts may yet be unknown. Nevertheless, for UK manufacturers, Brexit may favour the brave.
The Drapers Verdict
The future for British manufacturers holds as many opportunities as threats. Despite the feeling of being stuck in Brexit purgatory, those brave or adept enough to branch out will find openings and advantages.
It may never return to the mass-produced factories of decades past, but, with the right government support, and by taking advantage of its strengths such as speed to shop floor and sustainable production, the UK’s manufacturing sector could thrive in new ways in the decade ahead.