With Prime Minister Boris Johnson last night giving his new three-step plan to lift the UK out of lockdown, UKFT CEO, Adam Mansell, gives his views on what it means to the UK’s fashion and textile businesses, as well as how he thinks the government has responded to the coronavirus crisis so far, and other implications for UK manufacturing.
What does the new three-step plan to come out of lockdown mean for UK retail and manufacturing?
Manufacturing in England was never explicitly told to shut (although it was in Scotland). Factories have been planning how to open up gradually and with the safety of staff as the key priority. The PM’s announcement that certain parts of the economy could start to get back to work is very welcome. However, with retail here and in much of the world still closed it remains a very challenging time. We really need the government to adopt a more flexible approach to the furlough scheme to allow all businesses to stray back gradually and safely.
What do you make of the new government slogan, ‘Stay Alert’?
Whilst I understand the need to move away from the stay at home message, I’m afraid I don’t think stay alert is particularly helpful. A message that reinforced the need for social distancing may have been more useful.
What are your views on the lockdown measures to date with regard to fashion and textile businesses?
Overall, I think the industry has been quite impressed with the speed the government put the packages in place. The fact that we went from nothing to the furlough system in a couple of weeks was really pretty remarkable. I don’t think we’ve seen the government move that quickly before, and everything else they have put in place has been done with the best intentions. You could probably give them seven or eight out of ten, but there are a number of areas where they haven’t got to grips with things.
Those people who are owner/drivers of businesses, who are CEO’s who tend to pay themselves through dividends – not through the self-employment schemes or through salaries – they have been completely missed out of any support package whatsoever. Those people are hugely prevalent in our industry, and they’ve paid their taxes and VAT and done everything correctly, but they’ve been missed out of all the support packages, and that’s a concern to us.
Around 85% of all the companies in the UK are micro SME’s employing less than nine people. None of the manufacturers are getting any relief on the rates, even though they’ve closed most of their businesses. A lot of their retail customers aren’t having to pay rates, so that’s a sticking point for our sector as well. So, there’s areas where the government hasn’t done so well, but bits where they’ve done an amazing job in terms of the support packages.
Well, the major concern now is about getting back to work. The messaging from the government needs to be incredibly clear about the fact that people can go back to work. There needs to be proper advice around what ‘safe working’ means. I’ve been working with loads of our manufacturers and we’ve developed safe working guidelines for our industry. It’s now really about convincing employees that it’s safe to go back to work.
On the broader economic picture, the country simply can’t afford to carry on basically employing around six million people who are currently on the furlough scheme. We need to get back to some semblance of normality as soon as we can – whilst maintaining all of the safe working practises. Most of the factories are now beginning to put skeleton teams back in to get the looms back up and running. The garment industry is slightly behind on that because a lot of their orders have dried up. Then it’s a question of seeing what on earth the world looks like in three to six months. Nobody knows that yet.
Are there any other concerns?
Chuck in to the mix the idea of a no deal Brexit and things could get a lot worse before they get better. I know we’re not a member of the EU anymore, but the idea of leaving the trade area without a deal by the end of December means it all becomes really scary again. Some of our lobbying to government has been very much centred around that.
We’re talking to the government pretty much every day, and we’ve said that a lot of what they are doing is great, but we really need to sort out a free trade deal with the EU. It accounts for 76% of our industry’s exports. If suddenly we’re facing tariffs, or export barriers and extra paperwork, or it’s suddenly much harder to go to Paris Fashion Week and so on, then that’s going to have a massive impact on an industry that’s already reeling from the effect of COVID-19. It’s a pretty murky looking future, nobody knows what it’s going to look like.
Are there any positives?
On the flip side there are some potential positives out of all of this. The mess that we’ve all been seeing reported in the papers about the sourcing of PPE has seen the government now seriously looking at how they can help develop a supply chain in the UK. One that could help to deliver some PPE into hospitals in the short-term, and more importantly in the long term. If we can work with the government to increase our manufacturing capacity, and increase our technical skills, that has got to be a good thing. I obviously don’t want that to come at the cost of over 30,000 deaths, but we’ve got to see where there are opportunities.
The other major things is, all of the retailers will now be looking at their supply chains and asking themselves if they can actually afford to carry the risk load that means we’re sourcing everything from Bangladesh or China. They will be thinking that they really do need to start looking at their supply chains.
So, making in the UK could see a real resurgence?
There could well be an opportunity to near shore or re-shore some of the inventory. British manufacturing could therefore see greater demand and growth. Even before the coronavirus hit, and considering the implications of Brexit, lots of people were looking at manufacturing here. I’m not talking about bringing back huge volumes, because to be frank we don’t have the capacity to do that, but there’s certainly plenty of companies looking at bringing back an element of production to the UK, or nearer shore, to protect their supply chains and to make it a much more rapid process.
For certain parts of the market, selling UK made product in particular is part of their marketing strategy. However, it’s often at a price point that means there’s only a certain segment of consumers out there that can afford to buy it. But there’s definitely interest in bringing stuff back. The cost of shipping, air freight and all that kind of thing, along with the sustainability factor, are all now being considered. It means that people are looking at UK manufacturing in a different light. Logistics costs at the moment are something like eight to ten times more expensive than they were before COVID-19. Presumably that will drop but, whilst those sort of increases are in place, it will begin to wipe out all the basic cost advantages of sourcing from China and so on.
What other factors are there to consider?
Robotics are going to become much more of a reality in our industry. Literally using robots to make T-shirts, shirts and other garments. That is going to become an increasing reality for us, and if you’ve got a robot making something it really doesn’t matter if it’s in the centre of London, or the centre of Shanghai. It’s a robot, so you’re not going to have to pay it. There’s all that kind of thing to throw in to the mix as well.
How are you pushing for short-term legislation to ensure the larger retailers and businesses pay suppliers now?
That’s a hot topic right now. One of my team, Paul Alger, was in front of a House of Commons select international trade committee last week, and they asked that question. We’re talking to the government about the probable need for legislation to make sure retailers pay on time – or in a reasonable time, because we’ve got retailers now who have pushed payment terms out to six months. Can you imagine what a retailer would do if I went in to a shop, picked up a pair of jeans, walked out and didn’t pay them for six months? That’s what some of the them are doing to their supply base. Why should the much smaller manufacturing base take the risk when certain retailers, with their huge turnovers, don’t? It’s just not equitable, so there needs to be some sort of legislation in place if that’s the only way we can make it happen to ensure retailers pay within 60 days at the most.
What do you think trade shows and fashion weeks are going to look like going forward?
All of the major European shows, such as Pitti Uomo, that were scheduled for the summer have moved to September. We just don’t know if they will still go ahead at the moment. The issues are, will we be able to travel by then, and if we are then what budgets will companies have to spend? Virtually every single retailer is going to be sitting on an enormous amount of stock, so are they really going to want to be buying new stock now? They’ll want to shift what they’ve got.
Some of bigger shows, and the likes of London Fashion Week, are all going to be digital-only. Quite what that looks like and what that means, I don’t think any of us really know. What we do know though is that part of the buying process is the look, touch and feel, and you’re not going to get that through a digital platform. We’re pretty certain that the Japanese and American big corporations will put a travel ban on for the rest of 2020, so we’re not going to see any big buyers from Japan or America travelling to Europe in the near future. It’s hard to envisage what trade shows will look like.