EMCC dossier on the European textiles and leather sector

Like many other mature industrial sectors, Europe’s leather and textiles sector, has undergone dramatic change over the past 20 years. This EMCC dossier provides an in-depth analysis of the trends and forces driving change in the sector, using a compilation of relevant reports, company case studies and scenarios to give a comprehensive insight into an industry in transition.

The European textiles and leather sector, which also includes clothing and footwear production, employs over two million people in 177,000 enterprises, mainly small and medium-sized enterprises (SMEs), and has a turnover of more than €200 billion. Over the past 15 years, the sector has undergone large-scale restructuring. Modernisation of the industry has progressed considerably, productivity has increased, and production has been reoriented towards high-quality articles with a greater focus on innovation. However, this restructuring has also entailed a reduction of approximately one third of the workforce.

Further developments likely to affect the industry over the coming decade include EU enlargement, increased competitiveness resulting from innovation, research, skills, quality and creation, and, most significantly, the elimination of import quotas in 2005. As a result, the sector is increasingly subject to the pressures of globalisation, a major driver of change within the sector. Many factors play a role in creating a global environment for the textiles sector. These include efficient and low cost transportation, well-organised logistics from production to counter, new and changing consumer patterns as well as harmonisation of trade legislation. The penetration of information and communication technologies (ICT) across the entire business chain from design to production, logistics, sales, branding, and market research also increase the global dimension of the industry.

Against this backdrop and following the 2003 Communication on The future of the textiles and clothing sector in the enlarged European Union (pdf 317 kb), the European Commission has set up a High Level Group on textiles and clothing. Its aim is to stimulate debate on initiatives that will facilitate the sector’s adjustments to these challenges and improve its industry’s competitiveness.

In light of the imminent abolition of quotas in 2005, the European Monitoring Centre of Change (EMCC) of the European Foundation for the Improvement of Living and Working Conditions has compiled this comprehensive dossier comprising references to relevant reports, company case studies as well as scenarios. It offers an in-depth analysis of the current situation and examines the factors likely to shape future developments within the textiles and clothing industry in the years ahead.

Trends and drivers of change in the EU textiles and leather sector

The mapping report provides an overview of the European textiles and leather industry, mainly covering the EU15 Member States. It outlines the current employment situation, trade patterns worldwide and the structure of the industry.

The report analyses the main drivers of change, including: market liberalisation; globalisation; EU environmental legislation, focusing specifically on the strategy for a future chemicals policy, and environmental change aspects; overcapacity; changing consumer behaviour; new and improved fibres, textiles, and composite materials; information and communication technologies; and innovation in processing technology. It then examines the resulting trends in terms of strategies for managing change and industry action, as well as work organisation, employment relations and skills, training and lifelong learning.

Various aspects of these trends and drivers have been picked up in the scenario report, the Sector Futures articles and in the company case studies (see below).

The full mapping report, Trends and drivers of change in the EU textiles and leather sector (pdf282 kb), is available for downloading free of charge.

Industrial relations in the textiles and leather sector

As a monitoring tool, the European Industrial Relations Observatory (EIRO) offers regular updates and analysis on industrial relations in the textiles and leather sector across the EU.

EIRO also provides an outline of the first European Code of Conduct signed by the social partners in the textiles industry in 1997 as well as of the 1998 guidelines aimed at improving European coordination of collective bargaining on pay.

Implications of trade liberalisation

In February 2004, the European Commission’s Directorate General for Enterprise released a very detailed study, prepared by the Institut français de la mode (et al), on The implications of the 2005 trade liberalisation in the textile and clothing sector. It highlights the state of the textiles and clothing industry today (including market trends, present stakes, a competitive analysis per sector and a district analysis), and provides structural and competitive data analysis covering all 25 EU Member States. The report also reviews EU trade partners and competitors and what can be expected from the 2005 market liberalisation of the sector. On this basis, it draws up possible scenarios for the textiles and clothing industry’s future.

The main findings of the study are the following:

  • the current situation of the European industry is characterised by an ongoing deterioration of competitiveness vis-à-vis increasing extra-EU imports of finished and semi-finished products;
  • this is accompanied by a deterioration of production volumes and employment;
  • clothing production is likely to suffer more from liberalisation than textiles;
  • the overall impact of liberalisation on employment will be negative;
  • price competition is no longer a viable strategy for the EU. Adding value to industry’s activities is thus the only way to retain a significant part of production within Europe and the wider pan-EuroMed zone.

The report concludes with recommendations for companies in the sector to review their business strategies for developing or maintaining competitiveness, following two broad axes:

  • generating higher value through improved relationships with end consumers, an increase of fashion and/or functional content, and a development of communication and branding strategies;
  • creating higher value through better relationships with retail and industrial customers. In the case of retailers the objective is to allow them to compensate for higher costs of goods (compared to the cost of direct imports) by faster stock turnover. With regard to industrial customers, the added value should be derived from better service and better understanding of their customers’ objectives and requirements.
The full report (384 pages), Study on the implications of the 2005 trade liberalisation in the textile and clothing sector (pdf2.1 Mb), is downloadable for free as a pdf file from the Europa portal.

The textiles and clothing sector of tomorrow

Knitting the future of the textiles and leather sector: Four scenarios

The scenario report, Knitting the future of the textiles and leather sector, sets out four different scenarios to explore future developments in the European textiles and leather industry. Its aim is to present a scenario analysis that may be used as a vehicle to develop long-term perspectives to optimise the European textiles industry and the sustainable development of its workforce.

First the report reviews the scenario-building process. Each scenario then paints a very different picture of the possible Europe of 2010, with regard to the development of: ICT and production technologies; textile-related technologies; the EU; international trade; and the economic situation within the EU.

A more detailed overview of the report and the scenarios is available on this website as well as the full report Knitting the future of the textiles and leather sector: Four scenarios (pdf255 kb) for downloading free of charge.

Sector Futures

Sector Futures provides a series of three specialised feature articles based on the monitoring of existing foresight studies, scenario work, innovation studies and reliable data sources. The first article in the series on the textiles and leather sector, Textiles and leather in Europe: the end of an era or a new beginning? (pdf 67 kb), puts the spotlight on trends and driving forces that will map its future.

The second feature, Textiles and clothing: A dying industry or not? (pdf 80 kb), only covers the textiles and clothing industry, and focuses on six key drivers: international trade relations; organisation and structure of the industry; new and emerging technologies; human resources; environmental legislation; and enforcing international standards. Three ‘outlooks’ have been articulated for each of these drivers: an extrapolation of current trends and drivers (Alpha outlook); a situation where many things go wrong (Beta outlook); and a situation involving more visionary outcomes (Delta outlook). Its aim is not to forecast the future, but to explore plausible outcomes for the textiles and clothing industry over the next 10 years.

The third and last article in this series, Policy responses to post-2005 challenges (pdf 180 kb), summarises some of the policy responses currently being pursued at European level, in order to address the challenges facing the textiles and clothing industry. It presents several policy initiatives, ranging from those concerned with trade through to improving the skills and education of the European workforce. Yet, policy can only provide the framework within which the industry performs. It is primarily the industry’s responsibility to continue to move up the value chain, building its competitiveness on new technologies, innovation and design, in order to ensure a flourishing and competitive European textiles and clothing industry by 2015.

EMCC company case studies in the textiles and leather sector

The eight case studies outline how companies in the sector are currently positioning themselves and dealing with the positive and negative effects of change in the face of increasing globalisation and competition. Though not explicitly formulated, all the companies covered in the case studies are aware that their sector is very much part of what has been defined as a move towards the ‘experience society’. Here goods are traded not only on the basis of consumer needs and objective factors, but also on the basis of consumer perceptions of goods and their underlying values, and on their association with a particular identity.

The case studies also illustrate how previously distinct professional backgrounds and skills profiles have been progressively rendered obsolete and how new knowledge-intensive skills profiles have been emerging and converging in recent times.

A more detailed overview and case study highlights are available on this website. Each case study is also downloadable free of charge as a pdf file by clicking on the company’s name below.
  • Hennes & Mauritz (H&M, pdf150), Sweden, is a multinational fashion clothing retailer. Its core strategy consists of a mix of super-efficient supply chain management, logistics, and branding -successfully using new emerging technologies, especially ICT. The company is able to keep the balance of cost and quality while at the same time meeting rapidly changing consumer preferences.
  • Karstadt Warenhaus AG (pdf161 kb), Germany, is also a clothing and leather retailer. The company follows the same strategy as H&M, a mix of efficient supply chain management, logistics, and branding, in order to satisfy rapidly changing consumer demands.
  • Kvadrat A/S (pdf137 kb), Denmark, produces high-end interior textiles for a global market. The company has looked to the Far East to enter into strategic collaboration with firms in Japan, notably with one firm that has patented a new environmentally correct way of producing plastic-coated materials.
  • Liolà S.p.A. (pdf144 kb), Italy, is a 150 year-old company and part of the Liolà group. Its strategy is based on local, vertical integration of all phases from production to sales, producing high-quality knitwear for different market segments. ICT play a key role for Liolà to successfully implement its advanced form of the supply chain.
  • Liolàprint S.r.l. (pdf119 kb), Italy, is another Liolà group company, which specialises in printing and dyeing of fabrics for production.
  • Randers Handskefabrik (pdf117 kb), Denmark, is a small glove-manufacturing company, which has found its market niche through a combination of traditional craftsmanship and the wholesale import of semi-manufactured goods for finishing.
  • Redgreen A/S (pdf194 kb), Denmark, produces nautically-inspired fashion clothing. The company has begun to outsource design and creative processes to its Chinese suppliers, allowing itself to focus on its core competence: brand management.
  • Skillfast-UK (pdf209 kb), United Kingdom, is a skills service provider, which aims at reducing skills gaps and shortages and anticipating future needs through leverage on the supply side of education and training. The ‘right skills as a road to competition in a global market’ provide the basis to face the challenges of increasing demand for specialised skills in the textiles and clothing industry.

Company restructuring in the sector

The European Restructuring Monitor (ERM) provides an overview of restructuring activities and employment effects in Europe, including the textiles and leather sector. All information is based on the analysis of daily newspapers and the business press in the EU15 and three new Member States, the Czech Republic, Poland and Slovakia. The data gathered is presented in concise online fact sheets, which can be searched and sorted by different criteria - for example, by country, company or type of restructuring.

In addition, the summer 2004 issue of the ERM quarterly presents a sector focus (pdf 821kb), including an overview of restructuring cases for the period from April to June 2004.

Further relevant information sources

EMCC also highlights further information sources looking at the textiles and clothing sector, providing a brief summary and access details.

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