The average small to medium UK fashion manufacturer experienced a 68 percent increase in sales revenue during the first quarter (Q1) of fiscal 2025 (FY25) compared to the fourth quarter of fiscal 2024, and a remarkable rise of 171 percent year-over-year, according to new data from the latest Manufacturing Health Index by Unleashed, an inventory management software provider.
Despite this growth, business confidence turned negative in Q1 for the first time since 2022, affected by tax increases, inflation, slow growth, and global uncertainties. Nevertheless, the exceptional sales performance within the fashion sector suggests that UK manufacturers might be discovering unexpected opportunities amidst international market disruptions.
“The unusual business conditions of the first three months of the year had generally played out well for the country’s smaller producers, as had falling bank rates. Anecdotally, what we’re hearing from some of our customers is that Q1 brought welcome windfalls. Some tariff-affected international customers have turned to UK firms to do business, while others raced to order more before tariff pauses came off. That’s delivered a shot in the arm for some firms, but more importantly we’re hearing that steadily falling bank rates are starting to stimulate the economy, which obviously is very welcome to UK manufacturers who’ve posted a really strong start to the year,” said Joe Llewellyn, GM of ERP Small Business at The Access Group, the parent company of Unleashed.
However, Unleashed’s data revealed a decline in profitability compared to the previous year. The Gross Margin Return on Inventory (GMROI) for the average clothing manufacturer fell by 53 percent against the fourth quarter and by 36 percent year-over-year, yielding a £4.14 return for every pound spent on purchasing stock.
On a positive note, delivery lead times decreased to an average of 19 days, providing some reassurance. Shorter delivery times enable businesses to reorder in smaller quantities, making it a more cost-effective approach to increasing sales while enhancing margins.
In total, across all 12 manufacturing categories analyzed, sales rose by 30 percent in Q1 2025 compared to Q4 2024 and increased by 13 percent year-on-year. Profitability also saw a 10 percent boost in Q1 2025.
The higher profit margins observed in Q1 across the broader manufacturing sector may have been influenced by purchasing managers postponing their inventory replenishment expenses in light of low GBP-USD exchange rates. In January, the pound fell to $1.22, making international purchases pricier for UK buyers of goods priced in US dollars. However, by the end of March, the exchange rate had improved, reaching 1.34 at the end of April.
