From riches to rags in designer fashion: A glamour industry is losing the backing of textile firms, says Roger Tredre

WHEN fashion designer Arabella Pollen secured backing from Courtaulds Textiles in 1990, she was the envy of her fellow British designers. With the might of one of Europe's biggest textiles concerns behind her, the feeling was that Ms Pollen could take on the world and build a serious international business.

Last week, that dream was in ruins, her company no longer trading after Courtaulds Textiles, which had built up an 85 per cent shareholding in the business, pulled the plug. One of the brightest names in British fashion is no more.

The news sent a shock wave through the fashion community. Helen Storey, the designer, said: 'It is bad news for any small company that wants to expand and do so in a British way. Courtaulds (Textiles) was the first giant name to put its toe into the water, and now it's the first to back out.' The fear is that this will put the development of a strong British fashion industry back by years.

Other manufacturers that have links with designers include Dawson International, the knitwear firm, which recently rescued the Edina Ronay business, and Coats Viyella, which is supporting marketing and promotion costs for Ally Capellino, an independently owned high-fashion label.

The designers represent only the pounds 200m tip of the pounds 6.5bn British clothing industry. However, it could be different, say people on both sides of the industry, if designers and manufacturers would learn to work together. Giorgio Armani, for example, built up a pounds 350m fashion business in Italy through a close relationship with GFT, the textile giant. This is a common pattern for successful continental fashion houses, many of which have grown into substantial businesses.

But not in Britain. Traditionally, British designers have blamed UK manufacturers' conservatism, while manufacturers blamed designers for a lack of realism in their designs and attitudes.

In 1990, however, Courtaulds Textiles appeared ready to do things differently. Arabella Pollen was a fledgeling business with turnover of pounds 1.2m, requiring long-term investment.

What has stunned the fashion industry about Pollen's demise is that if anyone in Britain seemed able to make this kind of partnership work, it was Courtaulds Textiles. The company is acknowledged to be one of the best-run textiles companies in the world. In difficult trading conditions, it pushed pre-tax profits along to pounds 39m last year on turnover of pounds 890m. Martin Taylor, chairman and chief executive, is the City's blue-eyed boy: a former Financial Times journalist who has rarely put a foot wrong since turning to management.

Arabella Pollen had everything going for her at the time. A fashion publicist's dream, she designed lively, colourful clothes and looked good in the clothes she designed. The daughter of the former head of Sotheby's in the US, she was a favourite with the Tatler-reading classes, and she had connections in all the right places. When she founded her business in the early Eighties, her clothes were worn by the Princess of Wales. She was, for a period, backed by Naim Attallah, the publisher. More recently, she was regularly nominated for the designer of the year award.

So what went wrong? Ms Pollen was not around last week to explain - she was reported to be visiting the Cannes Film Festival. But Gerry Beeby, the managing director who had engineered the original deal after joining the company in 1989, refused to admit the company had made any mistakes. 'On paper and in practice, we were doing everything right. But the whole face of designer fashion has changed. We needed a dramatic increase in turnover to reach profitability.'

Martin Taylor of Courtaulds Textiles was equally adamant. 'The sort of gross margins you were able to make in the late Eighties simply don't exist anymore and probably never will again. The size you have to be to make a profit has gone up very considerably.'

Mr Taylor believes there are too many designers chasing too few customers. The 1980s saw an unprecedented boom in demand for designer clothes. But since the onset of recession, first in the US and Britain and more recently on the Continent, the market has declined sharply. By this reckoning, Courtaulds Textiles' original move into the market in 1990 was a severe miscalculation. The company failed to detect what many were already predicting: a steady fall-off in demand for high-priced fashion. It then attempted to launch the designer label on the Continent just as recession was beginning to bite. Arabella Pollen's export sales to Paris last March during the ready-to-wear shows were a last-gasp attempt to make an impact in the continental market, and it flopped.

It has also laid itself open to the old criticism of short-termism. 'I can't believe they gave Arabella Pollen enough time,' said Bruce Oldfield, the designer, last week. Mr Taylor argues that Pollen had no chance of breaking through. 'Believe me, if we believed the business could be viable three years from now, we would continue to back it.'

But is three years long enough? Courtaulds Textiles is not the only big name to misjudge the market. Bernard Arnault, the French financier, has yet to see any return on his investment in designer Christian Lacroix. In 1990, the pounds 10m launch of Lacroix's fragrance, C'est La Vie, was a disaster. The clothing lines have yet to make a profit. However, Mr Arnault has not so far withdrawn his backing.

The crisis in the French designer industry is testimony to the difficulty of operating in these markets in the 1990s. With sales down by 10 per cent last year, the world's biggest fashion names are retrenching. Cost-cutting has even hit couture, the promotional loss-leader of the fashion houses: Yves Saint Laurent loses Fr30m ( pounds 3.6m) a year on couture.

The British Clothing Industry Association is well used to the old accusations that the demand for a quick profit is what prevents textile companies giving any serious backing to fashion. John Wilson, the director, says that short-termism is a weakness running right through British industry.

However, he was reluctant to criticise Courtaulds Textiles. 'Arabella Pollen isn't the only casualty, and she won't be the last. It may be that the current climate is going to be the norm for years to come, with people preferring to buy basic commodity clothing rather than expensive, exclusive items.'

In this climate, British manufacturers are playing safe. They are opting for retrenchment and concentration on core businesses.

Courtaulds Textiles would argue it merely pulled the plug on a relatively insignificant non-core business. In the process, however, the group has plunged the flyweight British designer fashion industry into another prolonged period of questioning and self-doubt.

(Photographs omitted)