The textile and clothing industry is one of the biggest casualities of the strength of the pound against the Euro, and of the flight of high-street retailers to seek overseas suppliers, according to the latest Corporate Health Check by business research firm Experian.

The report says profitability, margins and productivity have all fallen consistently over the last three years, with the sector lying at, or very close to, the bottom of the industrial rankings for the key profitability ratios.

Return on capital employed was over 12 per cent three years ago, according to Experian. But in the first quarter of 2000 it fell by more than any otheer sector, to 7.28 per cent, the sector's lowest level on record and a drop of nearly one-fifth across the year.
The textiles sector remained at the foot of the industrial ranking, with the gap between the sector and the national average widening still further, to 5.33 percentage points.

The report says the industry cuts its prices to try to compete with cheaper imports, resulting in the steepest quarterly fall in pre-tax profit margins of all the sectors. In Q3 1998, the industries average pre tax margin was 4.07 per cent, by Q4 1999, it had dropped to 3.50 per cent and in the first quarter of 2000 it dropped further, to 3.21 per cent, the lowest level on record.

The average return on shareholders' funds across the textile sector was the lowest in the industrial ranking.

Falling from 11.28 per cent in Q4 1999 to 10.39 per cent in Q1 2000, it was just half the national average of 20.58% and was a fifth down on a year ago. The sector's ROSF has been in steady decline for the last three years, with the latest fall the steepest among all three sectors.

Average debt gearing fell below 25 per cent in the first quarter of the year for the first time since Q2 1998 and now stood less than half the industrial average debt gearing level of 52.39 per cent.

Asset utilisation fell by more than any other sector during the first quarter of the year, from 4.34 to 4.17 times, pushing the sector down from seventh to eighth place in the industrial ranking. Because of the strength of the pound, many companies had invested in assets outside Europe in order to minimize their cost, which had resulted in a relatively healthy level of asset utilisation.