The number of UK fashion manufacturers falling into insolvency rose by close to a quarter in the year to July 2024, amid a number of damaging supply chain headwinds and a customer shift towards pre-owned clothing.
According to research from tax and advisory firm Forvis Mazars, 106 UK fashion companies fell into administration in the year to July 2024, a 23 per cent increase from 86 businesses in the previous year.
The industry has been badly impacted by the UK’s cost-of-living crisis, which has had a huge effect on consumer spending. This has taken a hit on fashion brands, including luxury designers who have also been impacted by a drop in spending in the key Chinese market.
Faced with tighter budgets, many consumers have shifted to the “pre-loved” clothes market – which, according to GlobalData, is expected to comprise 10 per cent of the global fashion market next year and grow at an annual rate of more than 12 per cent.
Forvis Mazars partner Rebecca Dacre commented: “In a cost-of-living crisis many consumers simply do not have the disposable income to spend on luxury clothing. That has now impacted from the affordable luxury end of the fashion market right through to prestige brands. Some fashion manufacturers haven’t been able to survive the slowdown in consumer spending.”
“At the margins, the shift to pre-loved clothes, such as through Vinted, has also suppressed sales growth for clothing companies.”
“Post COVID, luxury goods were initially perceived to be largely immune to the fall in consumer purchases. But the weakening of the Chinese economy, one of the largest consumers of luxury goods, has seen many in the industry struggle.”
In addition to changing consumer habits, fashion companies have also been affected by shipping disruptions amid the ongoing crisis in the Red Sea, as well as delays in shipping textiles from Asia to Western manufacturers. In response, many fashion houses have chosen to overstock, rather than miss out on potential sales due to disruption in their supply chains. This overstocking has subsequently been exacerbated by falling sales as a result of the cost-of-living crisis.
Rebecca Dacre added: “Shipping delays are continuing to drive up costs for premium manufacturers in the fashion industry. That comes on top of what are already high shipping prices because of the crisis in the Red Sea “Premium brands are feeling the pressure to drop their prices to entice new customers, but this is harming their brand perception as exclusive retailers.”
Over the past year, UK insolvencies have outstripped levels seen during the financial crisis
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