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COVID-19 outbreak may cause a 50% drop in sales and production for The European Textile and Clothing Sector

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euratex-tc-business-confidence-indicatorThe Covid-19 pandemic could lead to a 50% fall in textile and clothing manufacturing in Europe as it is struggling with the financial and logistical implications of the crisis.

An ongoing European Apparel and Textile Confederation (Euratex) poll of European companies found that more than half expect sales and production to fall by more than 50 percent, while nearly nine out of 10 claim they face serious financial constraints.

Recent Eurostat data show that the European textile and clothing manufacturing went through a difficult year in 2019, despite good retail sales and export performances. This trend will worsen in 2020 due to the coronavirus outbreak. An ongoing EURATEX poll with its members shows that 80% of companies are already laying off workers; more than half of them expect a drop in sales and production by over 50%, creating serious financial constraints.

Data for 2019 show an economic slowdown in Europe, with manufacturing remaining under pressure from Brexit and trade frictions. Figures for the textile and clothing (T&C) industry are in line with that general situation: employment declined with over 2%, , and the EU27 turnover evolution turned negative for the first time since 2012-2013 with a -2% setback for textiles, and a -1.3% for clothing, compared to 2018.

However, some positive signs are still coming from the retail sales and trade. The growth rate in the retail sales of textiles, clothing, footwear and leather goods in specialised stores remained positive in 2019 (+0.9%).. In addition, EU27 trade is now exceeding €170 bn, a +4% increase compared to the previous year. Exports grew at a higher pace than imports.

The outlook for 2020 is expected to worsen due to the coronavirus’ outbreak, as in March 2020 industry confidence fell dramatically. EURATEX is conducting a survey among European companies: preliminary results indicate that more than half of the companies expect a drop in sales and production by more than 50%. Moreover, almost 9 out of 10 companies face serious constraints on their financial situation and 80% of companies is temporarily laying off workers. 1 out of 4 is considering closing down the company.

EURATEX, as representative of the textile and clothing sector, is concerned about the crisis and the pressure on the functioning of the internal market. Border controls within the EU have increased sharply, leading to delays in supplies but also cancelling of orders, thus aggravating the economic impact. Many companies in the T&C sector work under strong global pressure, with limited absorption capacity for such a crisis, and this survey shows that measures need to be taken immediately. EURATEX already asked the European Commission to foresee fiscal and financial relieve, ensure a coherent approach across EU Member States and avoid limitations to the free movement of goods and of the workforce.

Director General Dirk Vantyghem commented: “The EU and its Member States must do all it takes to save our industry. At the same time, this crisis is an opportunity to develop a new blueprint for our sector; the Commission’s new EU Industrial Strategy can offer a basis for rethinking our business model.”

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