Chanel wraps up in Scottish cashmere

Market fears fashion house's softly, softly grasp of high-end craft firms. Laura Chesters reports

Karl Lagerfeld's models sashayed down the catwalk at Linlithgow Palace, a roofless castle where Mary Queen of Scots was born 670 years ago, clutching sporran and hip flask-style bags.

Once the show was over last Wednesday, Chanel's head designer entertained his entourage with 45-year-old single malt whisky and a feast of haggis, langoustines and venison.

The event was an opulent reminder that the French fashion house, created by Madame Gabrielle "Coco" Chanel in Paris a century ago, is now the proud owner of a Scottish cashmere maker. In October, it bought Barrie Knitwear, which has a cashmere mill in the Scottish Borders, out of administration and saved 176 jobs.

At the show, Lagerfeld smiled: "Chanel came here, she discovered tweed here and the cashmere. Now we've bought Barrie."

This is the latest in a line of manufacturers the fashion house has been snapping up on the quiet. In September, for example, Chanel took over 120-year-old southern France-based glovemaker Maison Causse and it has owned feather specialist Lemarié since 1996. Chanel argues it buys these businesses – it now owns eight within its Paraffection subsidiary – as a way to preserve niche workmanship that would not survive without a larger parent in the face of cheaper competition from the Far East.

But some fashion insiders are concerned that the likes of Barrie will now only produce cashmere for Chanel rather than other clients, such as Jermyn Street tailor Turnbull & Asser and US department store Nord-strom. This is despite assurances from Chanel that the firms will continue to work for other designers.

One luxury industry insider thinks there is nothing to stop Chanel building a monopoly over these specialist skills. Such dominance would seriously damage other brands, should Chanel either go back on its pledge or hike prices.

Sources liken the situation to Swatch. The Swiss watchmaker owns most of the domestic companies that supply other brands with intricate mechanisms. Legal battles ensued when Swatch decided to ration which brands it would work with.

If Hermès or Louis Vuitton desire a particular button, cashmere sweater or feathered hat, to find the same skills and flair in Europe – outside Chanel's Paraffection – would be almost impossible.

However, the managing director of Chanel's other Scottish cashmere supplier, Johnston's of Elgin, bristles at the comparison. James Sugden argues: "We have been assured by Chanel that the purchase of Barrie is in no way a step to go deeper into manufacturing. It is thus to be seen as a defensive move to protect their very special family of suppliers. Swatch watches is not, from experience, where Chanel will go."

The world of fashion is awash with overblown scandals and spiky gossip. Luca Solca, the head of luxury goods research at Exane BNP Paribas, said: "Watch movements are a different kettle of fish: movements manufacturing – especially at the entry price point level – rely on high levels of automation. Volumes and scale, therefore, are of the essence to build a sustainable cost position. This is not the case for high-end crafts."

Whatever Chanel's intentions, Barrie's staff will be relieved that it has kept them in the work that sees them transform the fine underfleece fibre from wiry Mongolian mountain goats into the finest cashmere sweaters.