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From Rags to Riches Bringing UK Textile Manufacturing Into the 21st Century castintelligence.co.uk 1 October 2013 For and in Association with www.ukdealmakers.com

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Page 1: Rags to riches 31st oct 2013

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From Rags to Riches Bringing UK Textile Manufacturing Into the 21st Century

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October 2013

For and in Association with www.ukdealmakers.com

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October 2013

Best Efforts Basis Policy

Considering the nature of the requirement, which requires information that may be considered sensitive by certain parties; we provide this independent study on a “best efforts” basis.

Every effort is made to ensure the accuracy of the information contained within this document and we accept no responsibilities for any inaccuracies. More in depth intelligence services are available to enhance, verify and increase the information within this document.

!October 2013

www.castintelligence.co.uk

What is Reshoring?

Reshoring is the reversal of outsourcing; the transfer of a business operation back to its country of origin.

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October 2013

In the UK where design and sales hubs have remained, textile manufacturing has been focused on high value, technology and/or design led high quality short run customised apparel products.

Cast Intelligence have been commissioned to produce an outline report on the UK textile industry by a number of investment organisations coordinated by www.ukdealmakers.com. It goes beyond the politics and associated "noise" to examine the size, state and viability of the industry in the UK and what the requirements are to make a step change in product capacity to interest investors and determine the prospects of growth in the next 5 years.

The report seeks to stimulate debate and action in one of the most active textile manufacturing centres left in the UK namely Leicester and Leicestershire.

1. Introduction & Background

The UK fashion and textiles industry consists of over 79,000 businesses that employ over 340,000 people and it is worth in excess of £11.5 billion (£3 Billion of which is textile manufacture) per annum to the UK economy.

Textile manufacturing along with most other manufacturing sectors in the UK has over the last 15 years suffered from the movement of low and medium value manufacturing to the Far East and southern/eastern Europe due mainly to reduced transport costs, the lowering of economic trade barriers, improved communications, technology and most significantly the attraction of lower-wage economies.

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2. Key Findings

!• There is a significant UK Textile market achieving annual revenues of around £8 Billion.

• £15 Billion worth of textiles were imported during 2012 and £7.125 Billon up to summer 2013.

• Leicestershire has a vibrant textile industry embracing over 820 companies with a combined annual turnover of sector totalling £558,579,000.

• There are significant and real benefits of reshoring production back to the UK and evidence of it gathering pace within several manufacturing sectors including the textile industry.

• There are significant indications that reshoring will increase over the next 5 years.

• There is an increasing desire by UK retailers to buy British - driven by economic factors.

• The British textile industry needs support in terms of developing a skills base and enhancing innovation, capacity and capability.

• Eastern and Southern Europe are key competitors and a significant risk to UK textiles in competition for the reshoring to the EU.

• Greater industry representation and awareness is required in our study area of Leicestershire and beyond to exploit the reshoring opportunity identified.

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3. Market Size

The textile manufacturing industry in the UK has been in long-term decline, with the number of jobs falling from 800,000 in 1980 to around 100,000 at present. Last year it had export sales of £8.1 billion, most of these high-value items for export, whilst imports of clothing has rose to £15 billion last year, mainly from Asia. The complete market size is 23.1 billion.

Imports

The import figures were sourced from Inland Revenue figures. 2013 figures are year to date figures up to Summer 2013.

£ (000) Apparel Non Knitted Apparel Knitted Total Imports

2013 3,690,856 3,434,662 7,125,518

2012 7,534,608 7,625,807 15,160,415

Geographical Awareness

Cast Intelligence asked a number of experts and buyers within the textile community which areas of the UK they considered to be the key areas for the textile manufacturing industry. Findings are as follows:

Northern Ireland 12.5%

North West 80%

Borders 62%

Yorkshire 87%

London 10%

Leicestershire 75%

When questioned further the following areas were deemed as specialist in certain skills. As Follows:

East Midlands - Knitted Fabric - Leicestershire Weft Knitting and Nottinghamshire Warp Knitting

Yorkshire - Woollen and Worsted

Sudbury – Silk

Lancashire – Cotton

Scottish Borders – Knitwear

We conclude that there is clearly a viable industry in the UK and the substantial imports arriving into the UK suggests there is a significant scope for growth with around a £15 Billion opportunity to exploit.

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October 2013

!"Anybody who can do anything in Leicester but make a jumper has got to be a genius."

Brian Clough

4. Leicestershire in the

Spotlight

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October 2013

Cast Intelligence decided to focus on a single area to determine the size of textiles industry in a localised area. Leicestershire was selected down to Cast’s location in Nottingham and data available.

Historically, as the Brian Clough quote suggests, Leicestershire had a reputation for textiles and there are still 829 textile related companies in the area.

287 of these companies revealed their annual revenue providing us with a total textiles value to Leicestershire of around £504,379,000. Of the companies revealing their revenue the average turnover is £17,757,418. (Appendix B details the companies in Leicestershire)

46 companies achieve revenues over £1 million, 14 over £10 million and 7 over £20 million.

Even if the remaining 542 companies just averaged an annual turnover of £200,000 this would add an additional £108,400,000.

With this in mind Cast Intelligence predict the annual value of the Leicestershire textile industry to be worth between an additional £504,379,000 to £612,000,000, which suggests the area is responsible for c.20% of the UK's clothing manufacturing capacity today.

These figures clearly indicate that textiles in Leicestershire is still extremely important to the local economy. We also assessed awareness of the significant number of textile companies and skills within Leicestershire.

When discussing the textiles in the UK, 75% of those questioned isolated the Leicestershire areas as one of the main players, suggesting that Leicestershire is still known as a region where textiles are seen as a major player. A number of universities are aware of Leicestershire as a hub especially for socks and knitwear as many students undertake work placements in the region.

This data suggests that the knitwear industry in Leicestershire is “still vibrant” Some feedback from respondents implied that there is a significant amount of “finishing” products rather than raw material manufacturing.

There is a trade association in the region but they do not appear to be proactive or helpful and stuck in the past. They questioned why Cast were chosen to conduct the research and what we were going to do with the report rather than contributing positively. They made the rather obvious statement that textiles "was not as good as it was in the 1970s".

There are strong indications that some Leicestershire textile companies are investing significantly in their businesses of late. Recently Regional Growth Funding and local LEP initiatives have been heavily subscribed by textile related companies. According the BIS.gov website Lee Ann Fashions (Hinckley) received over £1 million of public funding to back their own significant private investment - safeguarding 60 jobs and creating 100 new posts.

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October 2013

The Economist in 2013 stated that a crucial change has taken place over the last 10 years in that wages have soared in the Far East, increasing by 7.1% to 7.8% (International Labour Association) and wages for senior managers in China match or exceed those in Europe and the USA (Hay Group).

However the financial crisis in the UK has meant reduced wage costs while Chinese workers have enjoyed increments of 10% between 2000 and 2005 and a further increase of 19% between 2005 and 2010 (Boston Consulting Group).

The Chinese government has also expressed its desire to increase wages by a further 13% until 2015.

Pressure on these rates will increase with regular strikes becoming more common and the management tending to succumb to employee demands as trained workers can walk out and find a better paid job relatively easily.

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October 2013

“Honda gave Chinese workers at their plant a 45% pay increase after strikes in 2010”

- Economist

Chinese aspirations are rising and they are less willing to work long hours whilst new labour laws make it very hard to lay-off employees.

The Chinese one child policy a rising aspirational middle class, European attention to detail requirements (compared to Chinese domestic products) for high quality products means labour is increasingly in short supply.

Furthermore new labour laws are reducing the flexibility of employing staff and making it harder to manage under-performing workers.

A recent article by Hamish McRae, one of the country’s most respected financial journalists working for the Independent and the London Evening Standard isolated an example of Huntmans, a North East based titanium oxide manufacturer deciding not to move to China solely down to their expected labour costs.

Mr McRae went on to state that wages in China will surpass US wages within 5 years.

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October 2013

"The cost benefit that China offers is quickly eroding”

- The Economist

Lead times and flexible production

Research suggests that this is mainly down to the Chinese government policies to encourage their domestic growth to keep up with increased living standards consequently lead times have increased requiring retailers to revaluate their options in Far East sourcing, as factories are finding it difficult to respond to quick turn arounds.

According to a Daily Telegraph article in June 2013 Lead times are becoming increasingly important and some retailers are waiting 16 weeks for textile deliveries.

Long lead time reduces retailer profit margins, especially if the order they placed and have waited so long for is deemed not to be popular by customers or the seasons are colder/warmer than normal. The retailers then have to discount the prices to sell the “distressed” stock off.

Evidence from buyers and industry consultants suggest retailers are now seeking the more flexible option of production closer to home allowing for lower stocks in the supply chain thus reducing lead times and allowing a faster production capability to respond to customer buying behaviour.

Trigon Diligence, a leading textile consultancy, examined cheap T-shirts priced at £5, jeans at £30 and tailored shirts with a projected price of £75. The price the UK retailer paid for all three items for an Asia-made product was substantially lower than buying from a local manufacturer. This gave the retailer a perceived healthy headline profit margin.

Trigon found that a UK made tailored shirt’s gross profit drops from £55.86 to £53.20 when adjustments for discounting are made.

The same product made in Asia due to poor lead times lack of flexible production lead to much much heavier discounting from £60.58 to £45.58 for the same tailored shirt.

Sellers are being forced to cut the prices of many products because they have ordered too many and then are unable to sell them due to changes in fashion and/or unseasonal weather conditions such as a late autumn or wet summer.

It is better to buy closer to home and have the opportunity to respond quickly to trends within the fashion seasons, LED by ACTUAL CUSTOMER BUYING PATTERNS. In other words retailers are adopting “lean” supply methods similar to those practised by Lean Manufacturing exponents.

The Evening Standard earlier this year reported that Zara who produce over 100,000 designs every year deciding to keep their manufacturing in the European Zone. They recognised that they do not always know which lines will sell until they “walk off the racks”. Re ordering and replenishing successful stock takes weeks, not months.

When Trigon took the local supply chain capability into account it was proved to be more economical to have jeans and tailored shirts made in the UK. The losses linked to discounting are much smaller for UK-made products – supply chains are shorter and it is easier to quickly alter designs and re order best selling lines.

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“UK manufacturing has to be based on niche markets, flexible production runs, high quality and innovation,” says Worsted yarn Manufacturer Laxton. “Customers can get cheaper yarns abroad but they have to buy it in bigger quantities and there’s less control over quality

and service.”

Fuel costs

It is accepted that rising fuel and logistics costs are making offshore production less economic and there is significant evidence that many UK companies are moving their manufacturing closer to home.

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To back these signs of change it is interesting to note that according to the Boston Consulting Group (US), the majority of large US manufacturers are now planning or considering reshoring from China.

The main reasons for this were cited as follows:

• Labour costs (cited by 43 percent of respondents)

• Proximity to customers (35 percent)

• Product quality (34 percent)

More than 80 percent of those questioned by Boston Consulting Group stated at least one of these reasons as a key factor.

Other leading factors include access to skilled labour, the cost of transporting the end product, supply-chain lead time, and ease of doing business.

As we all know only too well when the "US gets a cold the UK catches the flu". This is a positive indicator.

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October 2013

6. The British textile industry

Before World War II, Britain was one of the largest exporters of textiles in the world and until the late 1970s textiles were the UK’s fifth largest export.

The once vibrant sector has been decimated over the last three decades as retailers looked to cheaper options overseas. Estimates suggest that the value of UK fashion manufacturing has fallen by two thirds since the mid 1990s.

"Growth in textiles manufacturing in the UK and indeed any form of manufacturing will depend on the wit and entrepreneurial skill and determination of lead-individuals.... as it always has!"

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According to consultancy Clothesource UK production fell during 2011, although it is likely that its share of the UK market rose despite a decline in the total number of garments sold.

With the possible drive to “reshore” back into Europe and the UK - is the British textile industry still alive and is it capable of taking business back from the Far East? Research suggests that the UK art school education is the best in the world and mills employ well trained experienced and creative designers with the latest technology in digital printing .Young British designers are leading the world in applying the latest digital technologies to their skills.

There is a significant increase in demand for British made luxury goods especially in the “BRIC” economies and the United Kingdom produces sustainable ethical products made from biodegradable and naturally occurring raw materials.

This gives British manufacturers a significant edge especially at the top quality high added value end. This plus the great back story British manufacturers can give is making the British textile industry much sort after, especially at the top quality end.

Local spun yarns and fabric finishing reduces the Carbon Footprint, while modern spinners and dryers processes based on the latest technology further reduce environmental impact.

The British textile industry pushes the boundaries in terms of the use of technology and inventiveness resulting in increases in performance and sophistication of textiles.

It has been suggested in some reports that transparency throughout the whole manufacturing chain gives consumers confidence in what they are buying and their back story is a great draw for the international market.

A report on the 22nd September 13 in the Scotsman newspaper announced plans by Herriot Watt University to launch a Centre of Excellence. The £4 million centre will be based in the Herriot Watt University in Gala Shiels.

Research by the Royal Society for the encouragement of Arts, Manufactures and Commerce suggests that 200,000 UK manufacturing jobs could be created over the next 10 years.

“Attention to detail, care and quality – the UK textile industry offers unrivaled customer service and brilliant product”

- Beryl Gibson, Textile Trend Consultant

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October 2013

"Innovation is the key to our future. We need to take on new technology" James Sugden Johnstons of Elgin

“These are very exciting times for the industry,” he said. “The tide has turned. The decline of manufacturing and the wave of importation that started in the early 2000s and decimated the industry in Scotland and the UK has stopped.”

Provided the textile industry does not just wait for it to happen it could be major player in this employment growth.

This extensive report went on to outline growing opportunities in manufacturing, particularly for medium sized companies and predicted global production will no longer be the default approach for manufacturing in the future, and instead companies will look towards local manufacturing sources to make their products.

The RSA also states that there will be a more locally focused supply chain which could increase the value of UK manufacturing output by up to £30bn. Again great news for the UK jobs market, economy and trade deficit.

After talking to industry consultants Cast Intelligence isolated an opinion that within hugely important overseas markets, the British Woolmark still carries a cachet that many would be keen to imitate. Cast's sources suggest that it is likely that the increase in trade will come from top end manufacturers and a general move to the middle of the market.

The bottom of the market, such as Primark, is likely to be supplied by developing country producers with lower quality standards for "wear twice and throw away" garments for some time yet.

If British textiles manufacturers received the majority of business currently being imported would they be able to cope with the the demand?

The opinion of those approached is that the UK textile industry does not currently have the capacity to cope with the mass return of volume manufacturing. It will have to build up over time with investment in the issues raised in section 11of this report.

Opinion for Cast's sources indicates there is little yarn held in stock, there is a limited supply of volume dyeing, there are companies that can weave in some volume but those volumes may not be as high as needed and the opinion is that there is virtually no volume making up in the UK.

The data previously presented in this report would seem to challenge this perception.

“Global production will no longer be the default approach for manufacturing in the future”

- The RSA

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7. The Economic Importance of Technical Textiles Developing new ways of manufacturing textiles can cause serious technical challenges but according to companies like Laxton, the innovation cycle can be operated in-house so they are able to design the product through to getting it into bulk production in 8 weeks. Doing the same thing abroad could take 12 months and may still end in failure.

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“If you were to try to do that abroad it could take 12 months and even then it might prove abortive because of the language barrier, because of transportation and because there’s no interest in

halting large scale production to produce short test runs.” - Laxton's

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October 2013

The emerging generation of technical and performance textile products along with the latest developments in computing, biomaterials, nanotechnology, flexible materials and new processes like plasma treatment and wearable truly interactive electronics will all have a direct and significant impact on the textile markets and British textiles being leaders in innovation need to take advantage of it, and with the right investment, to become a world-leader.

There are many innovative products within these headings based on traditional materials and techniques as well as newly created properties and capabilities

Within each of these headings there are literally hundreds of products and applications for textiles, some traditional, some replacing other well-established materials and techniques, and some newly created by the unique properties and capabilities of textile materials and structures.

Textile materials are associated with hundreds on new applications and products.

The automotive and medical industries are major consumers of Techtextil and with the UK as a major centre for medical and automotive design, which requires attention to detail and specification, manufacturers in the UK should be in an ideal situation to take advantage of this. Techtextil uses include:

Automotive

Tyre cord and Hose and drive belt reinforcements

Thermal and sound insulation

Safety belts and airbags,

Filters and cable harnesses

Textile reinforced composites for body and suspension parts.

Car headliners and seating

Carpets, parcel shelf and boot liners

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October 2013

Medical

Babies’ nappies, hygiene and incontinence

filtration, surgical sutures,

Prostheses

Scaffolds for new tissue growth

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“Crucially there is a lack of knowledge of who is still out there manufacturing in the UK”

8. The Desire to Buy British

The decline in the textile industry has given retailers the perception that there are a limited number of manufacturers in the UK.

If Leicestershire is typical of the other areas of the UK that has retained a critical mass of production capacity then there are indications that buyers would place more and more business onshore.

There is also a perception by buyers that customer service is generally very poor and textile manufacturers are "not nice people to deal with."

Crucially according to a number of retailers and textile experienced consultants there is a serious lack of knowledge by buyers of which companies are manufacturing in the UK.

Research suggests that the UK public also like the idea of British made goods and are willing to pay 10% - 15% more than Far East manufactured goods.

Secondary research has been conducted to determine if there is a drive by buyers to buy British.

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October 2013

ASDA

Supermarket fashion brand George at ASDA recently revealed plans to bring some of its production closer to home during 2013 so they can source closer to the season.

During 2013 they contracted 7 factories in the Midlands to support the "rapidly increasing demand for shoppers for up-to-the-minute fashion", creating a growth of 80% from a low base.

JOHN LEWIS

Charlie Mayfield, chairman of John Lewis said he expects to see a "resurgence" in UK sourcing and the company has to source locally with the desire to offer unique/bespoke design products to the increasing numbers of consumers who shop online.

To support British manufacturing John Lewis put a 'Made in UK' logo on more than 4,000 products and is a driving force in their recently introduced men’s wear range.

Andy Street Managing Director of John Lewis wants his stores to increase sales of UK products by at least 15 % to £550 million, 12% plus of their revenues. During the last year John Lewis have increased their UK supplier based from 132 to 207 companies.

Particularly in the men’s department John Lewis have moved manufacturing to the UK for outwear jackets, shirts, ties, gloves and cufflinks for their mainline and fashion collections.

John Lewis have continued this strategy which suggests that they are selling the product.

“Our customers want to buy British if they can” - Andy Street MD John Lewis

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October 2013

“It is growing organically and our buyers are enjoying the experience”

- Andy Street MD John Lewis

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October 2013

Arcadia

Sir Philip Green of Arcadia increased the number of British factories it uses by 20% during 2012 to 47 from next to nothing several years ago.

Bad publicity is also a driver for these companies like BHS following the Bangladesh factory collapse and other incidents. They dislike being connected to investigations by organisations like the Institute for Global Labour and Human Rights into factories in Bangladesh claiming workers were beaten and forced to work overtime for slave wages, often between ten and 16 pence an hour.

Fires and collapses of factories in developing countries is not acceptable for responsible ethically minded retailers to be associated with. They have also found to their cost that they have very little control of quality.

Top Shop and ASOS, the online retailer, need to develop new ideas or have fast selling style are made quickly and have experienced a 60% increase in the use of British manufacturers during 2011.

Marks and Spencer

Marks & Spencer says its new tailoring collaboration with Richard James uses British fabrics. It has so far failed to go to the next step as they still currently manufacture in China.

Marks and Spencer despite publicly supporting a local sourcing policy was the only retail organisation approached who failed to respond to any questions.

Marks & Spencer obtains one-third of its hosiery from a factory in Derbyshire and has agreed to take some of Mary Portas’s British-made "Kinky Knickers" brand.

“We’ve been pushing to see what we could do to keep it nearer home. This is something we are permanently looking at every day, every week. UK manufacturing gives us a different capability”

- Sir Philip Green

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October 2013

Laxtons and Equipment Sales

Another excellent sign of the situation improving is that there are a number of reports from textile consultants, actual manufacturers report there has been an increase in textile equipment sales to UK manufacturing companies.

Secondary research isolated Laxtons on having invested heavily in machinery and processing, most recently investing £150,000 into equipment for a new finishing department with the help of a £18,000 grant from the Leeds City business growth programme.

Laxton state that there are clear opportunities for UK Textile manufacturing and that their core markets both home and abroad are split 50-50 to spread risk. This included yarn produced for hand/machine knitting, yarns for woven apparel and yarns woven into upholstery fabrics.

N Brown

N Brown, the Home Shopping giant, Merchandising director was reported to have held an open day for UK manufacturers and attracted more than 50 suppliers and now use 10 of them. They are driven to buy British as they want their internet based business to respond to customer and fashion trends quicker.

‘People say that manufacturing will never come back, but you can make it come back. Marks & Spencer sells 61 million pairs of knickers a year — all imported. Put a million of those back into the UK. Sort it out!’

Mary Portas

Courtaulds

A major buyer from a major super market pointed out that there has to be a strong and gradual push which is proving that manufacturing in the UK can work. Courtaulds Hosiery business in Belper, Derbyshire is a perfect example.

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9. "Will Reshoring Increase Over the Next 5 Years?" Since the New Dawn conference with Vince Cable in 2012 ,very little has changed (Appendix A) or happened and it will take more than a few buzzwords to progress this ; especially with banks not taking any risk.

There is evidence that the Vince Cable's New Dawn conference has started to have a positive effect. A Leicestershire based company recently won a significant grant and the current draw down secured 60 jobs.

We asked industry experts their opinion on whether they could see an increase in the use of British textiles manufacturers in the next 5 years.

Our findings suggest that there does appear to be evidence that there will be an increase but it will be dependent to a certain extent on the resolution of the challenges detailed in section 11 of this report. Opinion was that the industry has to be aware that this up turn in trade is not due to the current “British Look” fashion trend - but a real step change driven by economic factors associated to bottom line margins.

A number of mills we contacted stated that business was improving and are looking to expand their operations. This would be verified to a certain extent with reports of textile machinery orders increasing in the UK.

Within the lingerie industry there are many independent UK design houses who manufacture both solely and part in the UK. These include Lascivious, Agent Provocateur, Fleur of England, Made by Niki, Betty Blue's Loungerie, Ayton Gasson, Kiss Me Deadly, Ell and Cee, Nicole de Carle, Obey My Demand to name but a few. (Betty Hobcraft and other various sources)

This suggests that the independent luxury lingerie industry is thriving at the moment and this could continue for the next 10 to 15 years. There is a willingness by some retailers to bring business back to the UK and a lot of PR is being made by the Arcadia's and John Lewis's of this world.

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October 2013

“However after this when people are retiring, things might start to change. We need to train up the next

generation of manufacturers to keep the industry going!! University isn't for everyone, channel

people into a vocation, a career and skill they will have for ever.”

A recent example was Top Shop's PR statement, where they announced they had ordered Harris Tweed jackets for their stores. They only bought 70 of them.

Other comments include:

!"There seems to be some evidence (of

growth) in the luxury worsted,

woollen and high end knitwear businesses -

but not in mass manufacture".

"There is some evidence of increased sales from machinery sales. The increase is slow and kept quiet by manufacturers who are enjoying better times".

"There are some indications (of increased sales) , but more merchant trading than

manufacturing as such"

Other Examples of Recent Reshoring

Non textile examples of companies returning to the UK include the bank Santander moving their Call Centres back to the UK from India, Symington of Leeds transferred noodle production from China to Yorkshire and Raspberry Computers to Wales from China . According to Hamish McRae, car manufacturers are being forced to use local component suppliers.

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10. What Are Retail Buyers Looking for When Selecting a Textile Manufacturing Supplier? When retail/store buyers are selecting a textile

manufacturer there are varied opinions on the selection criteria but clearly a major concern is price.

Opinion suggests that it is Impossible to compete on price with countries like Bangladesh, Vietnam etc but retailers are beginning to understand the are hidden issues to about real costs of buying abroad.

Retailers are becoming more aware of the importance of design, quality, reliability and consistency of product. Price still plays a factor but it is becoming slightly less important compared to speed of delivery and flexibility.

There is significant evidence that buyers are seeking manufacturers to produce short runs on better placed products.

In return for this business buyers expect professional service levels, an excellent speed of response, innovation, excellent design capability and attention to details like the paper work and accuracy of spelling on labels.

This has not been the case abroad and in some cases in the UK.

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11. The Key Issues Which Could Hold Back UK Textiles

Some suggest that “it is purely down to price, anyone who says differently is lying. They are a business, they need to make money, but the

UK textile industry needs to inform retail buyers of the hidden costs and produce

exceptional customer service".

- An experienced textile consultant

Following our research we have isolated the suggested key issues to be addressed to significantly develop the textiles industry within our example location of Leicestershire and throughout the United Kingdom.

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October 2013

“The important business of textile manufacture is sometimes just too important to leave to third parties, that’s why we do it ourselves! On top of that we’re providing countless, exciting career opportunities for young people right across our manufacturing sites, as well as in innovation, design, science and technology.” - Cheryl Kindness Camira

Skills

There is significant evidence to suggest that opportunities will be missed if the issues surrounding skills shortages are not addressed by government and most importantly the actual textile businesses in the regions.

This is not an issue exclusive to the textile industry but due to the heavy hit the industry took with the rush to the Far East it is an issue which could significantly damage the long term viability of the industry.

The UK textile industry has faced significant competition from the Far East, with the result of a reduction in skills training and development. The resulting redundancies over the last 10-15 years has removed key important skills and these need to be replaced.

Our research in the Leicestershire and East Midlands certainly suggests that the trade skills are still there but are under-employed.

These people need to be captured again to work and train the new entrants to the industry with on the job training believing it be an opportunity of a sustainable long term career.

It is acknowledged that training new staff takes time and is costly, however business owners we have spoken to are nervous of taking on additional labour costs, unsure of what the future may hold. This has to be addressed by government agencies in the Skills and Training sector.

Local factories need to be given support to recruit and train a new work force and colleges should play a part but in the factory not solely in the class room.

Universities are producing the top quality designers and are already creating graduates with the skills required for Techtextil giving the opportunity to develop skills and find the once motivated work force to support them and the factories in the East Midlands and beyond.

This is a promising situation which should be taken advantage of with targeted skill development funding identified by manufactures - not the colleges.

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“People need to be taught how to sew, young people need to be trained in apprenticeships not told to go to Uni. There are no jobs in design, being able to sew is a skill you will always have and you will always be in demand. Make it more attractive for young people to want to work in a textiles/manufacturing factory. Attractive wages will attract people into the industry. Make it easier to fire and hire so they aren't put off growing".

- Betty Hobcraft

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Growth and Innovation

Like most industry sectors the recovery from this recession has been long and slow and governments need to introduce tax policies to encourage growth.

Attracting investors into the sector is important and government help with EIS and other tax breaks will help make this happen but the investors need to be guided as well as motivated to act.

Growth through innovation is very important and the industry must grasp new opportunities with a “can do” attitude. Looking back into the gloomy past or just placing a few “Growth Accelerator” coaches and pointless second rate management training into the companies is not what the industry needs.

It is also important that companies like the ones in Leicestershire innovate themselves with the help of universities. The companies must take the lead, not the Universities as they may see it as an excuse to build yet more facilities, research centres and create more wealth for themselves rather than the industry they ought to be serving.

Innovation and wealth creation must be directed by and to the companies who are employing staff as a number of companies expressed a fear that all the wealth will be creamed off by Universities and Consultants.

With the evidence of growth in the UK manufacturing textile sector, factories need investment to ensure they are ready for the increases and are able to cope with the rise in demand.

With the evidence of growth in the UK manufacturing textile sector, factories need investment to ensure they are ready for the increases and are able to invest more themselves in training.

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A number of Leicestershire companies are achieving high revenues already so (depending on profit figures) with encouragement and incentives may be able to invest more themselves in training.

Traditional textile manufacturing is very important but it is also essential for manufacturers to focus on Techtextil as an additional and profitable segment of business. Locations like Leicestershire with the links to the local strong automotive sector are ideally placed to take maximum advantage of this.

Developments to focus on could include 3D Weaving, lightweight structure to infuse with composites for light materials in the medical, automotive and airline manufacturing sectors and surface enhancement treatments.

“While some activity is underway, including Creative Skillset’s Higher Apprenticeship programme, more support is required to develop content which is relevant to the industry and the markets served”

Areas like Leicestershire should aim to develop and invest in a Centre of Excellence like the successful Yorkshire operation and develop an independent self funding apprenticeship programme where highly trained, motivated staff are brought into the industry. It is vital and will help dispel the reputation as cheap labour employers.

Assistance with growth in terms of workforce is vital as most manufacturers in this sector are nervous of taking additional labour costs unsure what they future may hold. To create innovative products designers need to be able to get sample products from manufacturers.

There is evidence of reluctance by manufacturers to help. Time and money is potentially wasted if the product is not confirmed as an order. Some factories according to designers including Betty Hobcraft are demanding 4 figure sums to determine commitment from the designer.

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Eastern and Southern Europe

There is clear evidence that textile manufacturing is coming back from the Far East, but it will be disappointing if the UK lost out and our retailers simply transfer work to Eastern and Southern Europe.

Buyers are able to pick and choose who they want to work with and the Eastern and Southern Europe solution could be an easier, cheaper option and they can then claim to have brought manufacturing back to Europe.

“Among buyers there is widespread ignorance about the very existence, let alone vitality, of British manufacturers of textiles, clothing and accessories”

Eric Musgrave

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Capacity and Capability

‘We have reached a point where the industry has been denuded to such a point that even if the big High Street retailers suddenly decided to buy British again, manufacturers simply wouldn’t have the capacity, the skilled staff and premises to meet demand,’ says John Miln, of the UK Fashion and Textile Association

This welcome growth in demand has however raised major issues about the UK’s capacity to respond, particularly regarding the availability of skilled labour as a high proportion of the sector’s skilled workforce is nearing retirement age.

Evidence suggests that some buyers are reluctant to switch to an unknown British supplier as they do not believe they will get the same service that they get from factories in Italy, Turkey or the Far East.

The number of companies in the Leicestershire area suggests there is a significant presence but they need to be seen as excellent employers with the ability to be flexible to retailers needs.

They need to demonstrate superb account management to show buyers that they are professional and good people to deal with.

At the moment it is perceived that there are not enough British factories compared to the amount of designers and retailers who want to use them, so manufacturers can pick and choose who they want to work with.

‘We’d need huge investment in plant and machinery, skills and apprenticeships. Surely it’s better spending money on building a productive workforce in a vibrant industry than on paying people to stay at home on the dole? Says Tim Roache - GMB

The fact remains that in the Leicestershire area alone there are over 800 textile companies.

Clearly there is at the very least a basic infrastructure in place with willing owners who will do what they can to make their business even more of a success.

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Lord Alliance said that in a few years the UK could “Once again have a textiles industry it can be proud of, with hundreds of thousands of jobs and a few billion pounds a year of extra output"

!!“For the investments to happen we will need to see

a big change in the mindset of retailers, which currently devote very little thought to UK-based

sourcing.” - Sir Stuart Rose

Representation

There are indications that retailers see supporting UK textiles as good PR at the moment and some significant people want to be associated with this shift. UK Textiles have clearly got something to offer retailers but action is required.

The concern for many UK manufacturers and consultants is that both the retailers and the textile industry in terms of structure, size and skill requirements actually know what the return to manufacturing in the UK looks like.

Following on from the “New Dawn Report” where Vince Cable set out the government’s support of the UK textile industry, traction is required and it is time for areas like Leicestershire and the rest of the country to start shouting about their industry.

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What is very clear with our research is that the manufacturing sector needs to re educate buyers from brands and high street retailers. As many of the buyers now making sourcing decisions in major companies are too young to have ever bought anything from the UK. (Stewart Roburgh Scottish Enterprise)

Representation of these textile manufacturers is urgently required without a single body in the East Midlands and other regions it would be very difficult to co-ordinate action.

The body should become a one stop shop for buyers to find the best manufacturing options for them in the region.

It must be driven by the manufacturers to engage with buyers. It can not be just another membership organisation with a fancy website with no human response interaction.

In our example this organisation would promote the East Midlands to buyers at trade fairs and directly lobby retail buyers at home, maximising the "Made in Britain” (and the "Made in Leicester) brand abroad.

Current organisations in the East Midlands and beyond who we made contact with appear to not be very proactive offering little and sorry to say appear to live in the past. However we do not include UK Fashion and Textile Association in this assessment as they were keen to make comment who work hard on a tight budget for the good of textiles in the UK. However they are based in London and recognise that they do not represent the textile hubs like Leicester effectively.

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The marketing arm for the East Midlands textile manufacturers should offer: •A “One Stop Shop” for retailers and buyers. When they are seeking a local textile supplier they can come to this organisation who will point them in the right direction.

•Lobby government for local support of textiles •Training support for local textile manufacturers •Sampling support for designers •Provide open days at manufacturers and retailers •Encourage the area to buy local with promotions and a “Made In” branding

• Provide support and promote the area to investors • Provide a funding and finance portal

• Apprenticeship support putting profits back into the textile industry

• Grant and export support for manufacturing companies

• Development of an Innovation hub possibly with the support of a University, but very much independent

• Promote technical expertise in the area

• Develop excellent in house, on the job account management skills training

• The Isolation of real costs to the retailers

• Encourage members to be trusted and good people to work with and have a reputation of being able to deliver what they promise

•Help build a highly trained work force treated well and exceeding national minimum requirements

•Business development, Customer and Strategic support

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12. ConclusionCast Intelligence were instructed to conduct research on an industry, which has gone through major changes and turmoil over the last 30 years which resulted in decimated communities and people's lives thanks to the rush of cheap import from the Far East.

Our research suggests despite significant issues to resolve perceptions of a dying industry is incorrect.

The government and banks are increasingly supportive and can see a brighter future for the UK textile industry.

The textile industry in the region we focussed on, Leicestershire, is very large and accounts for around 20% of the entire UK output. The area appears to be ready to make the most of the reshoring opportunity which is gathering momentum.

With the amount of textiles imported into the UK, £15.1 Billion per year (ref HMRC) any drive to further increase reshoring should provide a significant wind fall for UK textile companies and the nations balance of payments.

There is evidence that retailers are beginning to realise the hidden costs of manufacturing in the far east. The full cost of getting the clothing onto the rails, the lack of flexibility in the manufacturing processes, extended lead times and significant increases in wage demands in the far east are hitting retailers in the pocket.

There are areas of concern which although not insurmountable still need to be resolved. In summary these are:

• A lack of skills,

• the need to become more innovative,

• Lack of support for growth

• the threat from eastern and southern Europe competition

• A lack of local and co-ordinated representation to educate and direct retailers to find their ideal UK Manufacturing partner.

Underpinning these areas it should not be forgotten that the UK produces the best designers in the world, they are leading the cutting edge textile technology and innovation. In short the UK textile manufacturers have an excellent opportunity to grow and create significant numbers of sustainable jobs.

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Cast Intelligence

Cast Competitive Intelligence helps you to create a greater knowledge about your business environment, minimise uncertainty, be less surprised by rivals actions, make smarter decisions and WIN more business.

Get to the truth, close the gap on rivals, reduce risk, increase insight and understanding. Identify change, opportunities, isolate new markets and clients. Blow assumptions out of the water, avoid surprises and make the right decision.

Cast creates competitive awareness throughout your team and plan, build, train and audit your in-house intelligence function.

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We offer Research, Strategic Analysis, Prospective Market Analysis Competitor and Talent Mapping and Competitive Intelligence activities focused on your market and competitors.

We are experienced in creating competitive awareness throughout your team and are able to plan, build and audit your in-house Competitive Intelligence function.

Who runs Cast Intelligence?

Graeme has nearly 10 years Military Intelligence and 15 years Competitive Intelligence/Research, Head Hunting and Strategic Planning experience.

. Past President of Nottingham City Business Club

. Midlands Chairman of the Association of MBAs

. Business in the Community Mentor of the year 2012

!He is considered an authority on Competitive Intelligence and has had articles published in magazines for organisations such as the Law Society.

Make Smarter Decisions, Increase Sales, Avoid Surprises and Beat the Competition with Cast Competitive Intelligence

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www.castintellgience.co.uk

[email protected]

07866 263078

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Appendix A - Sources New Dawn Document

http://www.clothworkers.co.uk/getattachment/Textiles/Textiles-Conference/A-New-Dawn-Conference-Report-November-2012.pdf.aspx

Economist

Hay Group

International Labour Association

Inland Revenue

Boston Consulting Group

The Independent

Trigon Diligence

Clothes Source

Betty Hobcraft - Blue Loungerie

Jo Conlon - University of Huddersfield

UKFT

Daily Telegraph

Drapers on Line

Financial Times

Eric Mugrave

British Independent Retailers Association

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Appendix B - List of Leicestershire Textile Companies

https://docs.google.com/file/d/0B0Zdw7dWBHuYdF91bHA0dlpEMFE/edit?usp=sharing