This article is part of a four-part series examining the PCIAW® UK Manufacturers Round Table sessions held in 2024. The Professional Clothing Industry Association Worldwide (PCIAW®) brought together representatives from various textile and garment manufacturers based in the UK to understand the capabilities and capacities of UK manufacturers and address their concerns about market conditions. This second article examines the economic challenges facing UK manufacturers and the significant impact of Brexit on the industry.
How has Brexit affected UK textile manufacturing?
PCIAW® UK Manufacturers Round Table participants described Brexit as one part of a wider cost and competitiveness problem affecting domestic textile and garment manufacturing. Their 2024 discussions highlighted higher UK production costs, new customs administration, rules-of-origin complexity and reduced frictionless access to EU customers.
- Production costs: participants reported major gaps between UK and offshore unit costs, with labour, energy, materials and compliance all contributing.
- Customs burden: some manufacturers reported needing dedicated staff to handle post-Brexit export paperwork and border administration.
- Rules of origin: tariff-free UK-EU trade can depend on where product value and inputs originate, adding complexity for internationally sourced textiles and garments.
- Domestic advantages remain: UK production can offer shorter lead times, faster replenishment, easier communication and greater responsiveness than long offshore supply chains.
These are examples and experiences reported by round-table participants rather than economy-wide averages.
Related PCIAW resources: explore the UK Manufacturers network, the case for UK manufacturing and supply-chain resilience, and policy recommendations for UK manufacturing.
The economic landscape for UK textile manufacturing presents a complex picture of challenges and opportunities. While recent shifts have shown some promise for domestic production, fundamental cost pressures and the ongoing impact of Brexit continue to challenge the viability of UK-based operations. The PCIAW® round table discussions revealed how manufacturers navigate these economic headwinds while striving to maintain competitive operations in an increasingly globalised market.
The Stark Reality of Manufacturing Costs
The cost differential between UK and offshore manufacturing remains a fundamental challenge for the industry. Round table participants provided concrete examples that illustrate the magnitude of this challenge. One manufacturer stated that producing a technical garment in the UK costs £95, while the same garment costs £63 in Tunisia and just £45 in China. This represents a cost premium of over 50% compared to Tunisia and more than 100% compared to China.
These disparities translate directly into profitability challenges. One participant revealed that they achieve only a 15% margin on products made in the UK while generating a 63% margin on identical products manufactured through their offshore facilities. This four-fold difference in profitability creates powerful economic incentives to move production overseas, despite the strategic advantages of maintaining UK operations.
The cost challenge extends beyond simple labour rates. UK manufacturers face higher costs for raw materials, as the domestic textile supply chain has largely disappeared over recent decades. Energy costs, regulatory compliance, and infrastructure expenses all contribute to the higher cost base. While some manufacturers noted that relative costs have begun to decrease for the first time in decades, the fundamental disparity remains significant enough to influence most financial decisions.
The Hidden Costs of Offshore Production
Despite the apparent cost advantages of offshore manufacturing, round table discussions revealed numerous hidden costs that complicate simple price comparisons. Lead times represent a significant factor, with UK manufacturers typically delivering in 4-5 weeks compared to 8-10 weeks for locations such as Tunisia. Special requirements or bespoke orders can extend offshore lead times to 16 weeks, creating inventory management challenges and reducing market responsiveness.
The cost of maintaining large inventory buffers to compensate for longer lead times often goes uncalculated in procurement decisions. One manufacturer highlighted their ability to offer stock replenishment within four weeks, compared to three months for Asian suppliers. In today’s market, where customers increasingly expect delivery within 2-3 days, the ability to respond quickly provides tangible value that simple unit cost comparisons fail to capture.
Quality control and communication challenges add further hidden costs to offshore production. The ability to quickly address production issues, modify specifications, or respond to customer feedback becomes significantly more complex and expensive when manufacturing occurs thousands of miles away. These soft costs, while difficult to quantify precisely, represent real economic impacts that affect overall competitiveness.
Brexit: A Fundamental Disruption
The UK’s departure from the European Union has created profound challenges for manufacturers who previously enjoyed seamless access to their largest trading partner. Before 2019, UK manufacturers benefited from the EU single market’s frictionless trade. Brexit has fundamentally altered this relationship, introducing bureaucratic complexity that significantly impacts operational efficiency and profitability.
The bureaucratic burden has proven particularly onerous. One round table participant reported having to hire a full-time customs expert to handle export paperwork and that same participant is actively seeking a second person to assist in this new role. For SME companies lacking the resources to employ dedicated customs specialists, this burden falls on existing staff who may lack appropriate training, leading to errors that cause delays and additional costs.
The human impact of these changes extends beyond paperwork. Another participant shared that they lost a long-standing business relationship because their European-based buyer could no longer tolerate the additional complications resulting from importing from the UK. Such losses represent not just immediate revenue impacts but also the destruction of relationships built over years or decades, intangible assets that cannot be easily replaced.
Rules of Origin: An Additional Layer of Complexity
The Rules of Origin outlined in the UK-EU Trade and Cooperation Agreement (TCA) have created particular challenges for UK manufacturers. To trade without tariffs, a specified percentage of a product’s value must be generated within the UK or EU. Products failing to meet these requirements face tariffs that can eliminate profit margins entirely.
This requirement has forced many companies to fundamentally restructure their operations. Round table participants reported having to split production capabilities across countries, trading with the European Union via European branches while making redundancies in UK facilities. This fragmentation of operations increases complexity, reduces economies of scale, and ultimately raises costs for all parties involved.
The impact varies significantly by company size and structure. Larger organisations with resources to establish European subsidiaries can navigate these challenges more effectively, while smaller UK-based manufacturers find themselves effectively locked out of European markets they previously served. This creates a two-tier system where company size, rather than product quality or innovation, determines market access.
The Competitive Disadvantage Cycle
The combination of higher costs and reduced market access creates a destructive cycle for UK manufacturers. Without sufficient demand to justify investment in modern equipment and technology, manufacturers cannot achieve the efficiency improvements needed to reduce costs. One participant described purchasing second-hand equipment to quickly boost capacity for orders and borrowing equipment from overseas partners, but without a steady increase on demand they cannot justify investing in the latest equipment for their UK facilities.
This underinvestment perpetuates the cost disadvantage, as offshore competitors continue to invest in state-of-the-art facilities that further widen the efficiency gap.
Labour Costs and Workforce Challenges
The UK’s higher cost of living translates directly into higher labour costs that impact manufacturing competitiveness. Recent upward pressures, including increases in the minimum wage and the ongoing cost-of-living crisis, have made it increasingly difficult for employers to achieve profitable margins on UK-made products. While these wage increases benefit workers, they create particular challenges for manufacturers competing against facilities in countries with significantly lower labour costs.
The impact extends beyond simple wage rates. Smaller margins mean less flexibility for salary increases for skilled workers. As the salary gap between skilled and unskilled textile professionals narrows, experienced employees may seek opportunities abroad or in adjacent sectors which can offer better advancement prospects. This brain drain further undermines the industry’s capability to compete with manufacturers outside the UK.
Round table participants consistently identified retention of skilled staff as a major challenge to their business. When buyers prioritise lowest cost above all other factors, domestic manufacturers simply cannot generate sufficient margins to offer the competitive salaries needed to retain skilled staff.
Market Distortions and Fair Competition
The prevalence of “Brit-washing”, where goods manufactured abroad are deceptively marketed as “Made in the UK”, creates additional economic challenges for legitimate UK manufacturers. Examples shared during the round table included applying finishes to imported products, adding embroidery to finished imports, and outright relabelling of foreign-made goods as UK-manufactured.
These deceptive and often illegal practices allow disreputable businesses to exploit both the lower costs of offshore manufacturing and the premium some buyers place on UK-made goods. Legitimate UK manufacturers find themselves frustratingly undercut by competitors who face none of the actual costs of domestic production while tricking well-meaning customers who want to buy British at the cheapest price they can afford. Participants felt that not enough was being done to crack down on this issue, as some have reported these businesses to the authorities and little to nothing has been done to stop this from happening in the future.
The Price Race to the Bottom
A “race-to-the-bottom” mentality in both public and private procurement has taken hold in the UK market. Despite rhetoric about supporting domestic industry and valuing factors beyond price, procurement decisions consistently prioritise lowest cost. This creates an environment where UK manufacturers cannot compete unless buyers are willing to pay premiums that reflect the true cost of domestic production.
The irony is particularly acute in public sector procurement, where Conservative government messaging about “levelling up” and supporting British industry contrasted sharply with procurement practices that consistently favour lowest-cost offshore suppliers. Round table participants reported having government contracts withdrawn at the last moment for unclear reasons, while others were concerned about losing government tenders to cheap foreign competitors despite being leading manufacturers based in the UK.
Navigating Economic Reality
The economic challenges facing UK textile manufacturers are real and substantial. The combination of structural cost disadvantages, Brexit-related market access issues, and unfair competition creates a challenging environment for maintaining domestic production. However, understanding these challenges in detail is essential for developing effective responses.
The path forward requires recognition that pure market forces, in the current distorted competitive environment, will not preserve UK manufacturing capability. Without intervention to address unfair competition, support legitimate manufacturers, and recognise value beyond lowest unit cost, the economic pressures described by round table participants will continue to erode domestic manufacturing capacity until it reaches a point where recovery becomes impossible.
