Brexit fallout weakens Romania's clothing industry

Britain’s vote to leave the EU has hurt Romania’s embattled garment industry, exposing unfair practices by large clothing companies.

Ana Maria Luca
Ana Maria Luca NewsMavens, Central & Eastern Europe
Brexit fallout weakens Romania's clothing industry - NewsMavens
Belt and jeans. Pixabay

Why this story matters:

Over the years, southeastern Europe has become an important center for garment and shoe manufacturing by European companies: it was close, delivered fast and possessed a cheap and skilled labor force. According to official statistics, in 2017 the market value for apparel and footwear in Eastern Europe reached around 76.7 billion euros. This has already increased by around 4.1 billion euros in 2018.

Romania has roughly 4,500 textile factories -- employing more than 200,000 people, mostly women, in one of the EU’s poorest countries -- and many of them rely heavily on British clients who paid in pounds. But as the pound went into freefall on the back of Britain’s shock vote to leave the European Union in June 2016, many of these factories have seen their profits vanish.

For the many Romanian factories that employ women at minimum wage -- around 300 euros/month -- it has become increasingly difficult to survive, despite the low production costs, because they catered mostly to British brands which, after the Brexit vote, have been paying less and less to the producers.

Unable to raise prices -- with a pair of trousers produced for a mere 1 dollar -- Romanian garment factory owners are fighting for survival as they try to increase production rates without increasing the wages of their employees. 

“There is no way for the garment industry in these countries to upgrade,” Bettina Mussiolek, Coordinator for Eastern Europe and Turkey at the Clean Clothes Campaign, an alliance dedicated to improving working conditions in the global garment industry. “It’s a real trap both for the national economy and the factories. And it’s a social disaster because only poor wages can be paid and workers face extremely bad conditions.”

Despite labor unions and civil society raising concerns in recent years about human rights and the inhumane working conditions in Central America, Africa and Asia, the industry remains the primary employer for hundreds of thousands of women in the poorer parts of the European continent.  And their situation is not improving. As large factories try to compete, they often outsource orders to small manufacturers where oversight of worker conditions is almost nonexistent.

Details from the story:

  • Britain was consistently one of the biggest importers of clothes made in Eastern Europe. The relationship has been in decline in recent years, a change factory owners blame on the stubbornly low prices paid by British brands.
  • Since Brexit, British brands have resisted passing the cost of the pound’s fall in value onto shoppers; in an industry where margins are tight and every penny counts, that has left some Romanian factories scrambling to increase production to cover lost earnings and searching for clients elsewhere in Europe, according to interviews with more than a dozen factory owners and industry leaders.
  • The industry was already struggling with intense competition from Asia, a high turnover of workers leaving for Western Europe in search of better pay and working conditions, and the lack of bargaining power that comes with being at the very bottom of the supply chain.
  • Negotiations with British brands had become “crazy”, Romanian business owners say. They believe they are lucky if they can charge 15 times less than the price British shoppers will eventually pay for an item of clothing.
  • In reaction, some producers have changed their clientele, focusing on other EU countries, such as France.
  • According to a report published by the Germany-based Clean Clothes NGO, 70 to 80% of all the apparel produced in Eastern Europe, including in Poland, Romania, Bulgaria, Hungary and former Yugoslav states, is shipped to the EU, and half of it to Germany.
  • One factory owner reports that his profits have shrunk to around 5% of revenues, compared to 10-15% when business was better.
  • The wages earned by the textile workers of around 300 euros per month in 2017, are less than the average estimated expenditure of a household (550 euros), according to Romania's National Institute for Statistics.
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