A small but perfectly formed fashion boom

The market for designer children's clothing is bucking the downward trend

The clothing industry may be bracing itself for a difficult 2009, yet there is one small group that is faring particularly well in the fashion stakes: children. According to several fashion companies, little sizes are turning into big business as designer childrenswear is experiencing buoyant year-on-year growth.

The sector has become so profitable – Dolce & Gabbana has just announced that its kids' sales rose by 30 per cent in 2008 – that chic designers have taken to including childrenswear in their clothing lines. John Galliano and Marc Jacobs already produce mini designer gear, and soon Jean-Paul Gaultier will feature children's fashion. Boutiques and websites specialising in mini couture are springing up.

The influence of celebrities is growing. The likes of Suri Cruise, the Beckham boys and Jamie Oliver's daughters are often seen in the media wearing the latest designer clothes. "For some people it's all about creating a 'mini-me'," said one industry insider. "Seeing the children of celebrities looking smart in pictures plants a seed in people's minds."

For many luxury goods brands, kids' clothing is still a small portion of their total revenue – accounting for on average 3 per cent of last year's sales. Yet Burberry, for example, has seen revenues for the sector rise by 50 per cent since 2007. That figure is likely to increase when the company opens children's stores in the US.

In London, the retro-fashion favourite Cath Kidston opened her first stand-alone store devoted to childrenswear last August. Charlotte Knott, a spokeswoman for the British brand, said they believed the area to be more "recession-proof". "Parents are more likely to buy clothes for their children than themselves," she said. "Children grow out of them quicker and they are at a lower price point than adult clothing." But perhaps only just. On the trendy littlefashiongallery.co.uk website, launched last spring, Little Marc Jacobs dresses are £110 and a wool scarf by the upscale French label Bonpoint goes for £88.50.

But British children haven't always had it so good, according to the upmarket children's clothing store Elias & Grace. It believes there is a big hole in the market for childrenswear. "Children in mainland Europe are generally much better dressed than children in the UK," said Tamara Hema, the firm's creative director.