Apparel exporters concerned as UK goes into fresh shutdown

Bangladeshi apparel exporters are worried about a likely economic catastrophe in the wake of the fresh pandemic-led shutdown in the United Kingdom. The stringent measure will likely hit their businesses hard.

On 19 December, the British government introduced a set of new measurers to respond to a new Covid-19 strain thought to be up to 70% more infectious than the first.

Apart from the UK, some buyers in the European Union have already informed their Bangladeshi suppliers that they will not comment on their existing as well as new orders till 10 January due to the re-imposition of strict measures in some countries.

Talking with The Business Standard, RMG exporters said they are likely to face great uncertainty because shutdowns usually defer payments while orders are also either cancelled or halted.

Fazlee Shamim Ehsan, director of Bangladesh Knitwear Manufacturers and Exporters Association, said an EU buyer asked its Bangladeshi supplier on Monday evening to delay the production of its order for 4 lakh pieces of garments due to the spread of the new Covid-19 strain.

He said the exporter did not have any choice but to agree because he had already procured the raw materials.

The order's volume was about half the supplier's production capacity of two months.

Ehsan also mentioned that many manufacturers had been running their units at 70% capacity and it has started to go down since last week.

The UK has announced a Tier 4 restriction for London and the South-eastern and Eastern parts of England amid a surge in Covid-19 cases. It also issued the alarm that the new strain of the novel coronavirus is spreading rapidly in the regions.

Under the Tier 4 restrictions, non-essential shops, hairdressers and leisure and entertainment venues must remain closed with a new "stay at home" order.

According to an estimate of British Retail Consortium (BRC), the UK's new move will affect about $2.66 billion in sales per week.

DBL Group Managing Director Mohammed Jabbar said the new emergency measures adopted by the United Kingdom and some European Union countries will affect Bangladeshi apparel exporters.

"We have already experienced such an impact on cotton prices, which is increasing, but not significant yet," he added.

He mentioned that DBL Group has over $400 million annual business that mainly relies on the EU and UK markets.

Snowtex Group Managing Director SM Khaled echoed Jabbar.

He said RMG exporters will face economic consequences because of the new Covid-19 strain in the UK as some countries have already suspended their air connectivity with England.

Following a month-long strict shutdown when France was about to ease restrictions with a hope for the better, the UK's move brought this uncertainty for apparel exporters, he added.

"We have to wait at least 10-15 days to observe the real impact of the new situation. There is no doubt it will affect us," said SM Khaled.

Almost every factory has been running with 70% orders for the last two months, he added.

From the last week, Snowtex has begun to experience a slowed trend in order placement, the business tycoon said, adding that his group has secured a number of orders that will last them to operate the factory units till February with an eight-hour operation every day instead of 10 hours.

British Retail Consortium (BRC) CEO Helen Dickinson said the new stringent action by the UK government is "hugely regrettable," particularly when retailers had invested hundreds of millions making stores Covid-19-secure for customers and staff, reports Just-style, a British online portal. 

"The consequences of this decision will be severe. For businesses, the government stop-start approach is deeply unhelpful – this decision comes only two weeks after the end of the last national lockdown and right in the middle of peak trading," she added.

"Faced with this news – and the prospect of losing GBP two billion per week in sales for the third time this year – many businesses will be in serious difficulty and thousands of jobs could be at risk," she continued.

"The government will need to offer additional financial support to help these businesses get back on an even keel – an extension to business rates relief in 2021 is the best place to start," she said.

Richard Lim, the CEO of Retail Economics, said it will be a "crippling blow" for non-essential retail in the final days before Christmas.

"Thousands of retailers are hanging on by a thread, hoping to trade through these vital days before Christmas to strengthen their financial positions after months of disruption," he continued.

It is essential that an adequate government support is provided for an industry already on its knees, he added.

For many shoppers, a last-minute rush to place orders online will come too late as retailers struggle to cope with the sheer volume of orders, Richard maintained.

He said for many retailers, online capacity has already been exceeded and a last-gasp attempt for some is likely to push operations beyond their limits.