In This Article:
Britain’s £60bn textile industry faces a wave of insolvencies because of the Government’s new trade deal with India, an insurer has warned.
A free trade agreement unveiled last week means factories will be forced to compete with imports from Indian businesses who have cheaper labour costs and can undercut domestic UK manufacturers, trade insurance company Coface warned.
Textile imports from India currently face 10pc to 20pc tariffs – meaning that British firms with tight margins will struggle to keep up once these are slashed to zero.
The sector already operates on low margins, meaning there is little room to cut costs or raise prices when under pressure grows.
Jonathan Steenberg, the Coface chief economist, said insolvency rates within Britain’s textile and fashion industry could spike by 5pc to 7pc over the next 12 to 18 months, after import duties are reduced.
“These are lower-margin sectors, so it should be expected to hurt some businesses and potentially push some of them into insolvency,” he said.
The rise in insolvencies will lead to tens of firms closing and hundreds of job losses in parts of the UK that tend to be less affluent and have a weaker job market, he added.
“If you suddenly see that UK textile firms have to start competing further with Indian textile producers then that is probably going to be a triple whammy for this sector that we are already worried about.”
Coface is a credit insurer which covers £600bn worth of global trade, helping companies insure against the risk that debtors fail to pay them back for goods and services. As such, it collects and processes vast amounts of data on the risks faced by companies across the UK.
Textile producers across the country were already going bust at a rapid rate because of other pressures.
The industry is battling high interest rates, the surging national living wage and Rachel Reeves’s £25bn tax raid on employers. Donald Trump’s tariffs have also dealt a blow for the sector by making imports to the US more expensive.
Mr Steenberg said: “Our textile producers do export a lot to the US. They’re already hit from that point of view. It is also among the sectors that have the highest share of people close to the national minimum wage, which means the increase in national minimum wage obviously has a big impact on their cost.”
Britain’s trade deal with the US, secured the same week as the agreement with India, has done little to alleviate the hit for textile makers who still face 10pc US tariffs, as it was not among the sectors given better terms as a result of the agreement.