Fashion industry gets decimated by Europe’s soaring energy bills

The energy crisis that has closed aluminum smelters and steel mills across Europe is now dispersing to the continent’s fashion industry.

Thousands of small workshops and factories that supply brands such as Gucci and H&M have watched their business models unravel amid the surge in natural gas and electricity prices following Moscow’s invasion of Ukraine and the Russian government’s decision to reduce the flow of gas to the continent.

According to data from European textiles and apparel trade group Euratex, textile makers’ energy prices rose from 5% of production costs to around 25%, slashing their profit margins.

Textile makers said energy prices had risen so high that utilities and other energy vendors, concerned about not getting paid, are demanding that the textile companies secure bank guarantees or turn up with cash advances to protect months of expected energy bills.

In Italy, the biggest textile producer in Europe, many textile makers said they can no longer line up energy-purchasing agreements that previously insulated them from short-term price fluctuations.

Presently, the pain is striking up and down the supply chain, from weavers and spinners who consume lots of electricity to transform bales of wool into yarn to fabric dyers who use industrial-size dryers and gas-powered water tanks.