European Manufacturers Moving Abroad Due To Unmanageable Energy Costs

As Russia’s invasion of Ukraine continues to strangle worldwide energy markets, fashion industry manufacturers join a litany of industries struggling to stay afloat.

Manufacturers for such brands as Gucci and H&M are reportedly deciding between closing and moving their facilities abroad to countries like China to survive unmanageable energy costs.

After Russia invaded Ukraine, Western powers enforced embargos against the country, resulting in an energy shortage around the globe.

Recently, OPEC+ announced that the alliance, which includes Russia and Saudi Arabia, will be slashing oil production by 2,000,000 barrels per day, further exacerbating the energy crisis.

OPEC+ claimed that its decision was based on the “uncertainty that surrounds the global economic and oil market outlook.”

Western leaders have condemned the group’s production cuts, with the White House calling the decision “shortsighted.”

European businesses have been forced to forge through soaring energy costs or consider closure.

According to data from Euratex, a European textiles and apparel trade group, the price of energy is five times more than usual. Whereas energy usually makes up 5% of production costs, it now eats up 25% of production costs.

In the United Kingdom, up to 60% of factories are considering closure due to skyrocketing energy costs.

Companies such as BMW are pivoting by moving their production lines to other countries. BMX said it will now rely on China to build its electric Minis, abandoning an Oxford plant due to “inefficiencies” in the UK.

Stephen Phipson is the CEO of Make UK, a group tasked with representing UK manufacturers. Phipson implored newly elected Prime Minister Liz Truss to take “decisive action.”

“Government must step in to help struggling businesses, cashflow is already stretched to the limit, to pay what are now exorbitant energy bills by supporting sustainable factories and move further away from National Grid reliance,” Phipson said. “With an increasing number of manufacturers now in survival mode and taking drastic action such as cutting jobs, emergency action is needed by the new Government as soon as they are inside Number 10.”

“Number 10” is a nickname for the Prime Minister’s office, which is located at 10 Downing Street in London.