2022: The Reckoning (For UK Fashion & Luxury FDI) by Yasmin Jones-Henry
The world of global textiles manufacturing and foreign direct investment is a dark and debt ridden place. I should know, as a journalist I have written extensively on it over the years, tracking the data and writing reports for the Financial Times. Throughout my career the most frustrating thing about covering this sector, is under its other names – “Fashion” or “Luxury” – it is all too often dismissed as being frivolous.
The reason I started @workinfashion.me as a blog in 2016 was because I felt a strong provocation to challenge my former FT colleagues’ presumptions that fashion was less important than banking or pharmaceuticals.
How is it that a sector that is the second biggest driver of modern slavery (its victims from the farms and cotton fields to the factory floor are predominantly women and girls) thrives with such little scrutiny? How is it in the worlds of mergers, acquisitions and foreign direct investment, the chokehold US, Chinese and French conglomerates have had on the entire pipeline of global textiles, again, has received so little attention?
It is this refusal to shine a bright and glaring light into the murky corners of this sector that has permitted the widespread corruption endemic in this sector to persist with relatively little blow back. While the fashion editors have snoozed – or been content to look the other way in exchange for front row passes and invitations to after parties, this industry has continued to drag both third world and first world economies into a bottomless pit of overconsumption, debt and waste.
Scrolling through Instagram on my lunch-break today, I saw “Savile Row brand Gieves & Hawkes, together with Kent & Curwen and Cerruti have been put into liquidation” (FT, 2022). This story is not a moral tale of the further decimation of the UK’s retail sector or the mismanagement of brand positioning during the pandemic. No, this is a harrowing wake-up call, to the often unreported consequences of FDI (foreign direct investment); the eye watering levels of debt raised in these international acquisitions (that are widely celebrated but seldom scrutinised) and the consequences of who pays the real cost when it all goes down the drain.
The UK’s fashion, luxury and retail sectors’ over reliance on foreign direct investment looks very dystopian, when you dig a little deeper into the wider significance of the details behind Gieves & Hawkes collapse…This is a 21st century case of the Emperor’s New Clothes.
So how did this heritage brand established in 1771 find itself in such disarray?
Between 2013 to 2018, surprisingly, the UK (despite 20 years of relocating production to Asia) was regaining competitiveness as a destination for the design, production and manufacturing of global textiles (fuelled largely by the UK’s luxury fashion sector – men’s fashion and Savile Row in particular, being a world beating destination for international footfall). During this period, the UK ranked 14th – above both Bangladesh (15th) and Italy (17th) amongst heavyweight textiles manufacturing hubs (fDi Markets, Financial Times, 2019). This meant that UK fashion brands and manufacturers appeared to be an extremely attractive prospect to international investors.
With the UK fashion industry estimated to be worth £76bn by 2023 (Mintel), as the fastest growing sector, and one (as part of the luxury sector) that retained value not only in product but in brand and reputation, it’s easy to see why UK heritage brands were an attractive prospect to international corporations hungry for new and exciting acquisitions that would deliver immediate profit and prestige.
Gieves & Hawkes is stitched into this timeline. In 2012 it was acquired by Trinity Ltd (Shandong Ruyi group) – a self-styled “LVMH of China”. The comparison to the Parisian conglomerate was indicative of the group’s aspiration to offer a Chinese rival to the French luxury house that has dominated the European luxury sector and remains one of the most prolific sources of foreign direct investment – globally.
The Shandong Ruyi group effectively went on a spending spree over a three year period, when it agreed to more than fifteen global acquisitions that included British heritage brands such as Gieves & Hawkes, Aquascutum and the Carloway Mill (in Scotland) which is one of the last producers of the hand-woven Harris tweed. The $4bn spent in acquiring these businesses and controlling stakes in these brands – was raised under a heavy debt load.
Despite the group’s ambition to establish a Chinese luxury conglomerate that rivalled LVMH, it fell woefully short. In its recklessness and gluttony, the Shandong Ruyi group has plunged much loved brands such as Gieves & Hawkes into darkness. Worse, they have left in their wake Bangladeshi workers awaiting compensation. Details from a recent arbitration case with a Bangladeshi group revealed beneath the veneer of being a “Luxury” conglomerate, the company’s treatment of its supply chains more resembled the infamous “Fast Fashion” model with their refusal to pay compensation owed to workers. In 2021 the Chinese group was put on an industry blacklist by cotton suppliers – due to their failure to pay suppliers.
On 14th December 2021, the Financial Times reported that the Chinese fashion group that also controlled The Lycra Company as well as Gieves & Hawkes – had failed to pay back investors on a $153m bond. In January 2020, the FT also reported that the group’s international debt trading was at “distressing levels”. Moody’s had downgraded Shandong Ruyi to “very high credit risk”. The FT further reported that this inherent problem with the group’s supply chain highlighted “the extent of the Chinese company’s difficulties in paying off debts.”
So who is going to address the elephant in the room?
Since the arrival of the internet… UK retail has struggled to adapt and to evolve not only to e-commerce but to changing intergenerational lifestyle habits. In the Luxury sector they circumnavigated this problem by pivoting their attentions to the Far East, in the hope that the glare of their shiny British heritage brands would continue to generate enough international footfall and investment to cover the systemic inefficiencies across the entire pipeline. Covid, the restrictions on travel and now the geopolitical landscape as both Russia and China turn inwards, with their respective governments clamping down on high risk international investments and the shedding of foreign assets: leaves the UK’s fashion and retail sectors out in the cold.
The work that should have been done over a decade ago to diversify and revolutionise the pipeline of UK talent and investment from the classrooms to the boardrooms needs to be accelerated now. The UK fashion industry sector employs over 890,000 people, from the factory to the shop floor. Perhaps it’s time for the UK Fashion industry stakeholders to reevaluate what the longer-term vision, objectives and outcomes will be if they continue to fail to invest in their own pipeline of NextGen (domestic) investors and creative-entrepreneurs…
The thread that tied my childhood interest in fashion – to the wider world of macroeconomics and investment: is precisely why I created @workinfashion.me. Fashion more often than not, predicts and points to wider social and economic trends. Fashion is our canary in the proverbial mine.
If 2019 was the year of reevaluating UK Fashion’s environmental and supply-chain carbon footprint, 2022 will be the year UK Fashion reevaluates its dependency on Chinese foreign direct investment.
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