Writuparna Kakati | 19 Jul, 2008
India has a diverse and rich textile tradition. It is the second largest producer of textile and clothing in the world with its products being exported to over 120 countries. Recent estimates indicate that the country's textile sector will grow faster in the coming years and contribute a lot to the our overall economy.
These growth expectations run contrary to the perceived vied, a decade back or so, that textile was a sunset industry. Till 1985, India has no specialized policies to promote the textile industry. It is is 1985 that the government announced a separate policy statement with regard to development of textile sector. In the year 2000, National Textile Policy was announced and since then the Indian textile industry has been exhibiting a distinguished performance opening up new opportunities for the small and medium scale industries (SMEs) in the country.
Parallel to these developments the Indian textile industry has witnessed over the last few years, textile exports of the country have also grown exponentially despite stiff competition from Asian rivals like Vietnam, China, Pakistan and Indonesia. During 2006-07, India's textile exports were valued at $18.73 billion (Rs 84,752 crore) and they are estimated to be at $22 billion in the year to March 2009.
The US has remained a traditional overseas market for the Indian textile industry. But for the last few years, the Indian textile exports have started to make greater way into the EU countries including new markets such as Spain, the UK, Germany, France and the Netherlands . Among these markets, the UK has emerged as one of the most lucrative market for the Indian textile exporters, especially in the value-added segments such as readymade garments (RMG).
In 2003, India was the 3rd largest supplier of RMG (Readymade Garment) to the UK; later it came down to 8th position, and again gained its 3rd position in 2007. India's share has increased from 3.63% in 2003 to 6.09% in 2007. There is a growth of 13% in India's percentage share 2007.
Besides textiles, India, at present, exports a massive range of products to the UK which include jewellery, leather goods, chemicals, marine products, rice, tea and other agricultural products, engineering goods, metal manufactures, power generating equipment, software services, pharmaceuticals, etc.
Products which the UK export to India include power generating and telecom equipment, transport equipment, industrial machinery, non-ferrous metals, gold, rough diamonds, etc.
The trade relation between India and the United Kingdom have undergone a massive change over the last few years. Once perceived as a less developed country, India is today one of the largest economics in the world. The UK has remained the second largest trade partner of India since 2002 although the position slipped to fifth in the last year.
The UK textile market
The UK clothing sector had an estimated market value of $71 billion a third of which is imported. At present, the import rate is growing at 13 per cent.
As per UN database, United Kingdom (UK) appeared as the 2nd largest importer of RMG in EU27 Group and 4th largest in World with 16.79% & 7.28% share respectively. The EU27 region constituted 43.4% share in World RMG Imports.
UK's Global import was to the tune of US$ 631.880 billion in the year 2007 showing a growth of 31.27% . The United Kingdom imports one-third of its total imported clothing products from China, Hong Kong and Turkey while India had a share of only 1.17% as the 17th RMG supplier country.
India showed a remarkable improvement in ranking from 24th Position in 2006 to 17th supplier country. RMG constituted 3.74% share in UK's total imports and Woven Apparel (HS 62) and Knit Apparel (HS 61) ranked as 11th and 13th largest products imported by UK.
At present, the clothing sector in the UK has been suffering from overseas competition with lower production and labour costs. It is why many a domestic companies are shifting their sourcing to overseas suppliers. The UK textile market has polarised with demand for value-for-money products at the budget end and aspirational brands at the higher end while middle market has suffered from declining sales and increasing consolidation.
UK textile sector segments UK clothing sector segments
Man-made fibres - 15 % Womenwear - 53 per cent
Cotton and silk - 20 % Menswear - 26 per cent
Man-made fibres - 15 % Kidswear - 20 per cent
Household textiles- 13% Accessories - 1.6 per cent
Other textiles - 15 %
Textile finishing - 10 %
In the UK, larger retailers are increasing their market share at the expense of small independents. Almost 25 per cent of the entire retail clothing market of the country comprises of multiple shops while department stores comprises 9 %, home shopping 10%, discounters and sport shops each 7 %, supermarkets 2.7 %, market stalls 2.2 % and other outlets including online shopping 3.9 %. The market share of independent stores is 11 % but the number of this kind of shops is decreasing in these days. At present, large retail stores, department stores and chain stores are most widely engaged in direct importing. Most of the retail stores sell on consignment with merchandise from wholesalers due to lack of enough resources.
Opportunities in the UK textile market
The UK clothing sector is extremely competitive, but enough opportunities exist for Innovative design and fabrics, high quality, high end products, designer-wear, etc.
Find below 6 product groups where Imports from India grew by more than 50% in the year 2007-
Also find below 9 Product groups where Imports from India declined in the year 2007
Tariffs, regulations and customs
Total Tariff lines for RMG in UK are 448 at the 10 Digit HS Code level out which 174 are under HS Chapter 61 (Knit Apparel) and 274 are under HS Chapter 62 (Woven Apparel).
- Knit Apparel- 8.00 to 12.00%
- Woven Apparel- 6.30 to 12.00%
Textiles and textile products made in third countries may be subject to quota, licenses for which are usually granted on a first-come-first-served basis.
VAT: 17.5 % on all clothing and textile products. Children's clothing and shoes are VAT free.
Packaging requirements: Country of origin, washing and care instruction, fabric content expressed in percentage, flammability performance, child safety issues, such as draw-strings, etc.
Safety requirements: Covered under the Europe-wide CE Mark law, the Personal Protective Equipment Directive. Products fitting under this legislation must go through a testing process and must be marked with a CE Mark before being offered for sale in the UK. There are British Standards which govern the flame-proof and child-proof properties of clothing.
Shipping requirements: Before shipping any goods to Europe, you should obtain a written customs duty ruling from the UK customs service. These rulings are called Binding Tariff Information (BTI). Getting a BTI is free and will prevent any conflict over customs or excise duty.
Indian businesses which want to enter into the textile market of the UK may consider a variety of options like local retailers, mail order sellers and e-tailers, manufacturers in the UK market, or even direct sales to consumers. Find below some useful tips to determine your UK market entry strategy-
Appointing a distribution partner may help businesses a lot which want to make a presence in the UK market. Partnering with a local distribution company helps to understand the problems related to local customs and importing regulations. In addition, a local company knows better how to present some products in the market, how to sell them and what packaging requirements the products require.
Remember that the local companies in the UK expect long-term relationships with their suppliers. So, partner with a local company only when you consider the UK as a long-term strategic destination. You may look for smaller distribution partners who specialize in your type of products. Sort out all the requirements of your business and that is the key to success in the UK market. Research the market thoroughly before planning to export or opening a representative office in the country.