The cancellation of orders by UK retailers is causing a "major crisis" for Bangladesh’s garment industry, according to a government minister. The country has stockpiles of completed orders that won't be delivered and is faced with not getting the future revenue it had planned for.
The country’s commerce minister Tipu Munshi has called on the British government to take action to prevent a wipeout in the industry that currently employs 4 million people. There have been suggestions that as much as £2.5 billion worth of contracts have been canceled with retailers including Arcadia, Debenhams, Asda, Peacocks, New Look, and Sports Direct among those canceling some of the goods they’d ordered for the spring/summer season.
Munshi said that many garment factories were in danger of going under, which would create a further problem in the country beyond the impact currently being seen.
“The factories may collapse. They will not be able to pay key costs and may not be able to run again,” he said in an ITV interview. “That’s a major problem. The British government should take care of this. They have a responsibility. In our country, the government has taken positive steps to support [garment factories]. The UK should have to support the retailers also, so there is a stimulus, so they can take this load to support us.”
Bangladesh is currently in lockdown and has been so since March 26 with millions of garment workers told to stay at home, although there have been reports that some have been breaking the lockdown.
Bangladesh is a popular location for UK retailers outsourcing production. But its low wages mean very few workers are prepared for a crisis such as this and with wages not being paid during the lockdown, large numbers of workers are suffering disproportionately. There’s no furlough scheme in Bangladesh as there is in the UK, although the government is offering factory owners interest-free loans in the hope that this will allow them to support their operations (and their workers) during the crisis.
Some UK retailers have come in for heavy press criticism over the cancellation of orders and a number of them have stressed how they've been in negotiations with suppliers and have committed to paying for the orders placed. Both M&S and Primark have stressed that they’ve done this and Asda said that it was paying 60% for the orders it was unable to accept.
Meanwhile, New Look told ITV that it has reinstated some of the orders it had canceled from Bangladesh. “We regrettably had to inform suppliers we could not place new orders and would be temporarily postponing outstanding payments. We only did so out of absolute necessity. We have started making some supplier payments where we are able to do so,” it said.