Rekindling ties: Is the UK India's next big apparel opportunity?

Exhibit 1: UK’s import of textiles and apparel (in $ bn)

Source: TexPro

It has been a challenging year for textile and apparel imports. However, the rise in trade agreements for lower-cost discretionary items could prove beneficial for the global textile industry. There has been a decline in spending on clothing and apparel, with consumers placing greater emphasis on cost-effectiveness rather than quality. Imports in calendar year 2024 were impacted by the Russia-Ukraine war and a growing preference for domestic brands. Both textile and apparel imports dropped by approximately 3 per cent. However, certain segments, such as vegetable fibres and knitted or crocheted fabrics, recorded modest growth of 2.75 per cent and 0.9 per cent, respectively. The increasing consumer preference for domestic products may lead to a rise in imports of fibres, yarns, and fabrics.

Inflation trends in the UK

Exhibit 2: UK’s Consumer Price Index

Source: Office for National Statistics

The UK has been actively signing FTAs with India, the US, and the EU—an approach linked to its rising inflation in 2025. These free trade agreements could help ease demand-pull inflation by introducing cheaper goods, especially from developing economies.

Although there was a slight decline in May 2025, with the inflation rate dropping to 3.4 per cent from 3.5 per cent in April 2025, the year-on-year figure remains above the Bank of England’s 2 per cent target for CPI. However, the clothing and footwear industry presents a different scenario. The year-on-year inflation rate in this segment was lower in May 2025 compared to May 2024, though it did rise by 0.8 per cent month-on-month in May 2025. The Retail Price Index has shown an overall downward trend in inflation, suggesting stable consumer demand, particularly from the domestic market. These trade agreements could greatly benefit countries like India—not only through exports of finished goods but also through more stable and competitive pricing.

UK consumers are likely to benefit from more stable clothing prices and greater product variety as inflation cools and new FTAs reduce import costs. With lower tariffs and stronger trade ties—especially with countries like India—consumers may access better-quality apparel at more competitive prices, helping ease the pressure of high living costs.

Exhibit 3: GBP/INR - Exchange rates point towards higher profits for Indian manufacturers

Source: Bank of England

Exchange rates for exporters, especially textile and apparel manufacturers, are crucial given the thinner margins in the industry. In developing countries, factory-level manufacturers in the textile and apparel industry typically operate on very tight margins, often ranging between 5–10 per cent, and sometimes even lower. Meanwhile, global brands and retailers capture most of the value, marking up factory prices by 3 to 6 times and enjoying net margins of 10–20 per cent or more.

India’s textile and apparel industry is largely composed of smaller MSME manufacturers focused on increasing margins. The GBP/INR shows an upward trend, with the pound strengthening during 2025.

This is good news for textile and apparel manufacturers, as it means higher returns for their exported products. The trend is expected to continue well into CY 2025, with reports suggesting an appreciating pound. Moreover, the implementation of the India-UK FTA later this year or early next year appears positive in terms of profitability for the Indian textile industry.

Positive market signals: A promising outlook for Indian textile and apparel exports

Exhibit 4: UK imports of textiles and apparel in 2024 and 2025 (Jan-Mar) (in $ mn)

Source: TexPro, F2F Analysis

In the first quarter of 2025, India’s textile exports to the UK saw year-on-year growth of 7.49 per cent, rising from $6,053.67 million to $6,507.14 million. This growth was largely driven by finished textile products, which increased by 8.48 per cent—from $5,164.69 million to $5,602.75 million—indicating strong demand for items like garments and home textiles. In contrast, exports excluding finished products (such as yarns and fabrics) grew only slightly by 1.73 per cent, suggesting a shift in trade dynamics, with the UK focusing more on importing ready-to-use items rather than raw or semi-processed materials. This trend highlights the growing importance of value-added textile exports from India and the potential for further expanding its finished goods market in the UK.

How can India capitalise on the UK’s renewed demand for textiles and apparel?

As the UK experiences a modest yet steady recovery in consumer sentiment—reflected in a 2-point rise in its Consumer Confidence Index (from -20 in May to -18 in June)—India must position itself to leverage this momentum in the textiles and apparel segment. Notably, there is a clear shift in UK retail dynamics, with increased domestic sales and a growing preference for India’s finished textile goods, particularly apparel and home furnishings.

To fully harness this emerging opportunity, India should adopt a two-pronged strategy:

1. Strengthening domestic manufacturing through vertical integration

India must urgently restructure its textile manufacturing ecosystem to enable greater vertical integration—bringing spinning, weaving, dyeing, finishing, and stitching under a unified framework. The current fragmented setup increases lead times and adds logistical complexity, which is particularly problematic in the era of fast fashion and disrupted global shipping routes. A vertically integrated model would not only improve efficiency but also allow Indian exporters to meet UK retailers’ demand for agility, traceability, and speed.

2. Maximising the gains from the India-UK Free Trade Agreement

With the India-UK Free Trade Agreement set for implementation in late 2025, India must proactively align its export practices with UK regulatory norms. The Federation of Indian Export Organisations (FIEO) has already taken steps to map 8-digit tariff lines where product descriptions diverge between the two countries. Such harmonisation will ease customs clearance and reduce technical barriers, providing Indian exporters with a competitive edge in the UK market.

As inflation eases and economic stability returns to the UK, the stage is set for it to reemerge as a high-potential destination for Indian textiles and apparel. With targeted reforms and strategic alignment, India can not only regain lost ground but significantly expand its footprint in one of its most historically important markets.

ALCHEMPro News Desk (NS)