The European textile industry is facing a loss of competitiveness. For one the energy cost in Europe is six times higher than in the US, China, and neighbouring countries. This factor alone has almost erased the business case for producing in the EU.
At present, many textile and clothing companies are producing at net loss or have shut down production. Industrial conditions have worsened in such a way that there is no business case to invest in Europe or buy products produced or processed in the EU. It is only the sense of responsibility of entrepreneurs towards European society that is keeping plants and production running. While the EU is passive and extremely slow in articulating a credible and effective response to the energy crisis, its main international competitors and trade partners have developed comprehensive state-aid frameworks for their domestic industry. It is expected that energy prices will remain high and volatile, opening the door for imports to gain substantial market shares in the EU.
Comprehensive relaunch plan could be a saver
The market situation has eased somewhat over the past months, but the crisis remains because gas prices are still extremely high in comparison to last year. This suggests that the current loss of competitiveness of EU manufacturing will not be recovered even with lower energy prices, unless measures are taken to correct the playing field on which the EU industry has to operate in the international markets. Only with an ambitious and comprehensive relaunch plan can Europe be able to restore its credibility as a global manufacturing powerhouse. If the status quo is maintained, not only the EU will not be able to recover its competitive position on the global business stage, it will also fail in its plans to reach zero-net emissions and achieve circularity. These ambitions need massive capital investments.
Urgent action needed
The whole value chain, from fibers, nonwoven, to fabrics, clothing manufacturers, is facing unprecedented pressure deriving from the current geopolitical situation, the new macroeconomic conditions and competition. The industry fears the situation is going to worsen if no emergency action is taken, especially because a recession is expected in the coming months. The main structural component of EU manufacturing is small and medium units which are particularly exposed to the current crisis as they do not have the financial leverage to absorb the impact of energy prices for much longer. Urgent EU action is needed to ensure their survival. Access to finance and markets must be safeguarded for all those actors who are capable and willing to invest in Europe, on the basis of reciprocity. In these challenging times for geopolitical stability, ensuring strong trade ties with the EU’s traditional allies and partners is of the utmost importance.
The roll-out of an investment and state aid plan should not interfere, but rather support, the dialogue with the US (and other partners) and the deepening of the EU’s trade and investment partnership.