The Economic Impact of COVID-19 on the Fashion Industry

The Economic Impact of COVID-19 on the Fashion Industry

“People do not buy a new outfit to stay at home”. The words of Lord Wilson, CEO of the fashion brand Next.

Fashion retailers are being hit hard by the lockdown; for many, online orders just aren’t enough to make up for massive drop in store sales and disruption to supply chains and markets all over the world.

What effect is the coronavirus having on the UK’s clothing brands?

The impact of the lock down and supply chain interruptions on the fashion industry is considerable. Next has predicted losses of up to £1bn, 25% of its annual turnover, with a fall in sales of £445m. While some brands will be able to sustain this, others – such as Laura Ashley – have already announced that they’re facing collapse. 

Laura Ashley high street shop front

The hidden impact on manufacturers and garment workers

Many of the big fashion giants – such as Primark and Matalan – are refusing to pay for orders that have been manufactured or are already underway. Collectively, these big brands have cancelled or suspended £2.4bn of existing orders in order to reduce costs.

How have they done this?

  • Using force majeure clauses in contracts to justify withholding payment.
  • Postponing the delivery of orders so that invoices can’t be raised.
  • Cancelling upcoming orders and refusing to pay the costs of raw materials that have already been purchased by factories.

The impact of this on factories, workers and their families is severe. In Bangladesh more than a million garment workers have already been sent home without pay, and many factories are themselves on the brink of collapse. 

Is there a positive in this? 

Some retailers, such as Tesco, Next and M&S, have now announced that they will pay all outstanding invoices, and will not cancel any pre-existing orders. 

However, there are clearly endemic problems in the current system that leave manufactures with most of the risk (for example, having to pay for raw materials up front). We hope that the current situation will lead to greater visibility of these issues, and motivate brands to put in place greater protection for people and businesses at the bottom of the fashion edifice. 

As you may know, our underwear is manufactured by one of India’s leading ethical manufacturers. Unfortunately, they have had to temporarily shut down operations to protect the health of their workers in line with government advice. For us, this means postponing the launch of new ranges, but apart from that it’s business as usual. We’re continuing to fulfil your orders and are working to the highest sustainable, ethical and – of course - hygiene standards. For more information, visit our live coronavirus page for updates on the situation.

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