Hard rain in Asia hits Britain's classic mac

Colin Blackstock
Saturday 16 May 1998 23:02 BST

THE double-whammy of a strong pound and the Asian economic crisis is hitting the luxury goods market, devastating profits and forcing manufacturers to close factories.

The makers of the quintessential British raincoat, Burberry, have had to close two factories and cease production at their Hackney site with the loss of around 250 jobs. The company maintains the closures are a measure taken for long-term survival. A spokeswoman for Burberry said: "We are a luxury goods company, and like other luxury goods businesses we have a very big market in Asia. The Asian crisis and the strong pound have all played a part in us having to close our factories. We have tried in the short-term to protect our long-term future."

Burberry's trench coat, a mix of wool and cotton, was developed in 1865 by Thomas Burberry to replace the rubber-lined mackintosh, and was worn by troops during the First World War. It is regarded as the classic English raincoat, although it has recently faced stiff competition from waxed Barbour jackets.

Mulberry, another luxury goods group based in Somerset, revealed in March that its profits had been devastated by the strength of sterling. It has already closed down one factory and expects to make a loss of pounds 750,000 this year, while its debts are now pounds 7m.

The problems facing the luxury goods producers are widespread in their industry. After having profited from a weak pound, they are now beginning to realise the consequences of it.

The Mulberry Group estimates that the strength of sterling against European and Far Eastern currencies meant it incurred losses of pounds 2.4m of sales in the first half of the trading year.

Roger Saul, Mulberry's chairman and chief executive, said: "We, like all British exporters, are being punished by the strength of sterling. Compared to last year, for every pounds 10m of export sales, we have lost pounds 2.5m."

The strong pound means that fewer tourists come to the UK; those who do spend less during their visit. Clive Vaughn from Verdict Research, a retail consultancy, said that shops such as Harrods and Asprey are feeling the effects of a strong pound, after a good ride on the back of a weak one.

While luxury goods groups are struggling financially in the Far East - traditionally a strong market for them - they maintain that their sales in other areas are good.

Burberry say sales in the US and Europe remain buoyant despite the problems in Asia.They say they had no choice but to make cuts, closing one factory in Whitby, North Yorkshire, and another in Littleport, Cambridgeshire, with the loss of almost 100 jobs at each site.

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