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Beyond the Bale : June 2015
54 MARKET INTELLIGENCE The UK economy is currently outperforming all other countries in the European Union. Growth post the world economic crisis has been sustained and aided significantly by UK remaining outside the Euro zone. GDP grew by +3% in the first quarter of 2015. In the same quarter in 2009, GDP fell by -5.6%. Although much has changed, the business community is pleased with the recent election results and looks forward to seeing continued policies that have encouraged growth and tackled the debt. Historically, most of the Australian wool clip was processed in the West Yorkshire valleys. Some still is, but bulk manufacturing left these shores in the three decades following World War 2. However, niche manufacturing of finer micron yarns and fabrics is very much alive and well as is the manufacturing of woollen spun knitwear yarns and tweed fabrics. In Yorkshire and Scotland there is a sizeable upholstery weaving industry using 21 micron Merino wool. All sectors are reporting good domestic and overseas business, and capacity is increasing for the first time in four decades. Most of the key players are now Woolmark licensees and those who once shied away from us are now some of our more enthusiastic partners. Mills need the quality assurance guarantees that Woolmark certification can offer. The healthy state of trade in the woollen and worsted sector that employs around 10,000 workers in around 40 mainly small and medium sized companies is due to six factors that have developed since the crash of 2008. 1. Export growth to Asia: Demand for UK fabrics in Japan and China grew exponentially during the crisis as the move to quality accelerated in Asia. Most of the UK wool textile companies are more than 75 per cent export. In short, those firms that were majority export survived, those dependant on home trade failed. The current rising value of the pound is of concern. 2. The fashionable ‘British Look’: UK mens and womenswear fashion brands have expanded their presence under licence in Asia and North America over the past five years as the British Look continues to remain a 'good taste reference' in global men's wear in particular. Gieves and Hawkes with 150+ stores in China is a case in point, as is the continued expansion of the Paul Smith brand in Asia. Isetan, Japan's leading department store stocks more than 100 UK brands, many of which are made under licence locally or in China. 3. Trading up: The UK retail industry has seen the process of polarisation accelerate over the past seven years. The middle market is being squeezed as retailers such as Marks & Spencer seek to trade up and align the perception of their fashion departments with the excellent reputation of their food offer. The clear beneficiary of retail polarisation is John Lewis which was traditionally positioned in the upper segment of the middle market. John Lewis' operating profits rose by 62% in the last fiscal year. Chairman of John Lewis, Sir Charlie Mayfield said his results were 'hard won'. In Australian terms, John Lewis is more David Jones than Myer. 4. Ingredient branding: Much of the UK men's and women's wear retail offer is made in China. To disguise the oriental origin, men's wear brands in UK and Japan that are seeking to trade up, use the growing phenomenon of 'ingredient branding' – which I discussed in the March edition of Beyond the Bale – which is where branding of the key component of the garment, the fabric, is featured on the garment. 5. Home of menswear: London's reputation as a world hub for men's fashion is unchallenged and the arrival of the London Collections Men fashion week in 2012 has confirmed and consolidated London's preeminence in a sector of fashion that is growing globally. The UK wool textile manufacturing sector has benefited through association accordingly. 6. Campaign for Wool: Last but in no way least, the Campaign for Wool has given an extraordinary boost to the industry both in UK and in markets where The Prince of Wales’ message of environmental excellence is well received by consumers seeking quality via a fibre upgrade. Although the mood in the trade is good, there are concerns about, increased Corporate Social Responsibility (CSR) issues and complicated compliance regulations, currency movements, the lack of effective primary processing in UK, a shortage of skilled operatives and the volatility of growing export markets in Asia, particularly the Chinese crack down on gifting and its effects on the luxury market in China. THE EMPIRE In the second of a regular feature article written by AWI’s Global Strategic Advisor Peter Ackroyd, we provide an insight into a resurgence of the wool textile industry in Britain that will benefit Australian woolgrowers. Mr Ackroyd is President of the International Wool Textile Organisation and Chief Operating Officer of the Campaign for Wool. STRIKES BACK Peter Ackroyd, President of the IWTO and Chief Operating Officer of the Campaign for Wool.