Rising costs hit UK retailers

Clothing and footwear prices have risen for the first time since 1992 as pressures in raw material and labour costs continue to mount on UK retailers,  according to the global business information company Textiles Intelligence. Textiles Intelligence

revealed that UK clothing and footwear prices soared by 0.9% in September compared with the same month last year. This latest figure comes at a time of tentative economic growth and impending rises in unemployment as a result of across-the-board cuts in government spending.

Even more alarmingly, the price increase between August and September hit a record at 6.4% and coincides with warnings that consumers may be in store for higher prices.

Katherine Miles, Consultant at leading retail industry experts Verdict Research, explains to Fashion United the various factors forcing retailers to bump up prices: “Upward cost pressures in a number of areas have driven clothing prices to increase for the first time in 18 years. Currently cotton prices are at a 15 year high, transport costs continue to climb, labour costs in the Far East are rising and the pound remains weak, which all contribute towards driving up inflation.”

Miles continues: “These mounting costs have resulted in retailers’ margins being squeezed and are now at a level where retailers have no choice but to pass on some of the costs to the consumer.”

In addition to the increases in raw material costs, many textile mills in low cost countries now have to pay higher wages to workers. In Bangladesh, for instance, trade union pressure has resulted in an 80% rise in the monthly wage for the “lowest grade” worker over the last four years. Textile Intelligence forecasts that prices in shops are unlikely to fall to levels which European and US consumers have been enjoying for over a decade on this basis.

Another possible factor is VAT. With the rate rising from 17.5% to 20% in January 2011, Miles rationalises that retailers may be attempting to take the sting out of the increase ahead of time.

“Many retailers may also be attempting to soften the move to 20% VAT in January 2011, by gradually putting prices up in advance,” she says.

Miles adds: “Additional costs are historically easier to hide in Autumn/Winter collections, in higher priced garments such as outerwear, suggesting many retailers will have already revised prices. We expect the Womenswear and Menswear sectors to be hit hardest by inflationary pressures, which will only begin to ease towards the end of 2011, when we will see a small return to volume.”