Manufacture of Leather and Leather Products

Introduction

A traditional manufacturing sector with long associations with Lancashire, the Leather and Leather Products industry, that today also uses many other materials to manufacture its products, is a relatively narrow one in terms of its scope comprising:

• The tanning and dressing of leather
• The manufacture of luggage, handbags and the like, saddlery and harness
• The manufacture of footwear for all purposes, of any material or process, including parts of footwear – uppers and parts of uppers, outer and inner soles, heels, etc.

Within Lancashire the industry is dominated by the manufacture of footwear, this accounting for about 90% of the total job count.

Employment

Today the Leather and Leather Products sector is a rather modest sized one with a local employee workforce of less than 400, equivalent to only 0.4% of Lancashire's total manufacturing employees. However, despite these small numbers, its local representation still remains much the same as that nationally with Lancashire accounting for about 3% of all GB jobs in the sector. Within the sub-region Rossendale was traditionally a recognised centre of the footwear industry though today relatively few manufacturing jobs remain. The bulk of jobs are now split between Hyndburn, Rossendale and West Lancashire. The employee workforce is split roughly 60/40 between males and females with 86% working on a full-time basis: nearly all of the part-time employees are female.

Structurally, it is a highly fragmented sector traditionally with a strong family-owned business orientation. Following successive waves of downsizing there are relatively few large employers amongst the 35 establishments that now make up the local industry: all but a handful of companies employ less than 10 people and statistically, the average size of manufacturing units is just 10 employees. Lancashire's largest footwear manufacturing company is today Beaconsfield Footwear, trading as Hotter Comfort Concept, based in Skelmersdale (see below). Several other previously important players within the industry such as E Sutton and Son Ltd and Bacup Shoe, both based in Rossendale, continue to operate within the UK footwear market but all their manufacturing activity is now outsourced to overseas locations.

Employment Trends

The industry has had a long presence in Lancashire having its origins in the manufacture of slippers from felt and seems to have begun in the 1870s in Rossendale. Early companies obtained many of their premises and workers from the decline in the textile trade. By 1893 there were 10 slipper factories in Rossendale producing 70,000 pairs per week and employing 1,300 people and the slipper trade was described by the local press as "the industry that has saved Rossendale". The earliest official statistics of insured employees across Lancashire indicate that 9,000 people were working in footwear manufacturing in 1929, rising to over 13,000 by 1939. Throughout the 1950s and 1960s between 11-13,000 people were directly employed, accounting for around 10% of national footwear jobs. The local sector was overseen by the Lancashire Footwear Manufacturer's Association. From this peak of the industry's fortunes there has been a steady and relentless contraction associated with ever rising competition from import penetration, cyclical periods of weak consumer demand and the need to contain labour costs and boost productivity.

Figure 1 Leather and Leather Goods Jobs, Lancashire, 1950-2006

Source Ministry of Labour/ONS - ERII Employment Records

Following some modest revival in fortunes in the early 1980s linked with higher consumer spending, a competitive currency and fashion swings in favour of the domestic industry, footwear again entered into another major and prolonged downturn post-1987 which the strength of Sterling and high levels of import penetration exacerbated. Employment dropped off very rapidly resulting in a net loss in excess of 6,300 jobs (-90%) between 1987 and 2001 before apparently stabilising from 2002. Additionally, there were several important large company closures amongst the net 50 or so establishments that shut over these years. Rossendale alone endured the loss of 3,500 footwear jobs over this period. This reduction in employment opportunity was one of the largest of any local industry. Such was the scale of decline in the industry that since 1998 there have been more people in Lancashire employed in the retail sale of footwear and leather goods than there have in its manufacture.

General Characteristics

The local leather and leather products industry is now a relatively small player in the Lancashire economy. In 2005 the industry achieved total turnover of about £69m and generated output (gross value added) of about £27 million. This accounted for barely 0.5% of Lancashire's manufacturing total and was less than a half of the industry's output ten years earlier, though it did represent around 8% of the national industry's production. The industry has increased productivity though GVA per head remains low by the standards of manufacturing industry. The labour intensive nature of the industry is further characterised by its relatively low net capital expenditure, which in 2005 stood at £2.1m or about £3,000 per head. Whilst on a par with the UK industry average this level was below the Lancashire manufacturing industry average. Employment costs per head stand at a similar discount.

Figure 2 Leather and Leather Products Production Trends, Lancashire, 1994-2005

Source ONS - Annual Business Inquiry

The principal difficulty facing the industry for many years has been its vulnerability to low cost overseas producers since the Multi-Fibre Arrangement that governed trade in the textile and clothing sectors for many years never covered international trade in footwear, though there were some occasional voluntary restraint agreements. It has thus been wholly exposed to fluctuations in international trade, a position that has been exacerbated by the high degree of concentration in the UK footwear retail sector. The pressure has been most intense among makers of unbranded low cost women's and children's shoes and slippers which traditionally accounted for the largest slice of production locally, but even at the upper end of the market – the "branded industry" – firms are now having to use more imported components. Imports first surfaced as a problem for Britain's shoe producers in the 1950s – initially from Italy and Spain, latterly from the Far East, China and South America – accelerated over subsequent decades and today dominate the home market, accounting for more than 90% of all shoes sold in the UK. Some manufacturers have had to rely on profits from importing to compensate for losses in manufacturing. Others have abandoned UK-based footwear manufacture entirely outsourcing this part of their business and focusing on design, marketing and distribution.

As well as import penetration the sector also suffers from cyclical trends. Individual customers purchase most footwear and such expenditure is variable, often being reduced or deferred in times of recession and over time a diminishing share of consumers' expenditure has been in footwear (and clothing). This issue has been compounded over recent years by real falls in footwear retail prices due to increased competition at retail level and the growing globalisation of product supply with UK production increasingly relocated to low-cost centres. A few Lancashire companies have sought niche markets as partial protection from these trends such as emphasising expertise in product design and distribution and by contract sales to major customers like the military or industries requiring specific work or safety footwear and orthopaedic shoes.

The main hope for the industry is to improve its competitive position. The key to this is new technology hand-in hand with differentiation on quality and investment in marketing. New technology not only enables manufacturers to improve productivity but also to move up-market by making more complex and innovative footwear, which would not be cost effective if made by hand. Some attempts have been made to introduce new production technology and the sector has indeed become more mechanised and enjoyed a reasonable growth in productivity. However, the footwear production process is highly intricate and leather and many of its substitutes is an irregular material and difficult to handle. Also, the fragmented and conservative nature of the industry has undoubtedly been a disincentive against mechanisation in all but the larger companies and in general footwear technology remains relatively basic by comparison with many other industries and most technological advances have been embodied in capital equipment which is sold worldwide.

Thus, in spite of new investments and organisational changes, including better supply chain management, which have undoubtedly help to shorten production times, enabling a quicker response to fashion trends, the industry remains relatively labour intensive and its generation of value added per head (i.e. wealth creation) remains amongst the lowest of all manufacturing industries (and less than half that of transport equipment manufacture or food and drink, for example). Locally there is little exporting. Its low value added together with the squeeze on margins because of import competition and retail buying power means that profit margins are generally low and the industry's image remains that of a traditional low pay and rather unattractive sector with consequences for attracting new and appropriate skills and the take up of formal training has been slow. The industry faces a difficult and uncertain future in which its fortunes depend critically on its ability to supply high quality and niche products to high-income countries.

Beaconsfield Footwear

Beaconsfield Footwear, Skelmersdale

That a future for footwear manufacture in the UK can continue to be sustained has been amply demonstrated by a remarkable local success story. Beaconsfield Footwear, established in 1959 who operate under the Hotter Comfort Concept name has successfully developed its products as the UK's fastest growing show brand. Flying in the face of conventional shoe industry wisdom, in November 2003 the company opened a brand-new £6m shoe factory in West Pimbo, Skelmersdale to meet the rapid growth in demand for its range of medium-priced womens' and mens' "comfort shoes"

This was the first footwear factory to be built in the UK since the industry's heyday in the early 1970s. The most labour-intensive part of shoe production – the production of its leather uppers – has been outsourced overseas but design, resourcing of materials and the "lasting" of its shoes – the most critical part of the manufacturing process – are all undertaken in-house. The company has invested heavily in polyurethane direct moulding machines which allow it to respond quickly to changes in end-consumer demand.

Beaconsfield offers a wide range of footwear options to its customers. Its range of women's footwear includes wedges, slip-ons, boots, sandals and slippers. The company also designs a separate line for men's footwear that includes formal and casual shoes, slippers and sports shoes. In addition, it offers various accessories such as purses, bags, wallets and pillows.

By developing its own brand which emphasises "comfort" rather than price or fashion, the company has ended its reliance on lower-margin volume products produced for large stores and retail chains that account for more than 90% of all UK shoe sales and where buying decisions hinge largely on price. It has moved towards serving independent and franchise retailers but most significantly has built up a direct mail order business with its own dedicated call centre as well as providing for direct sales over the internet. Mail order and e-commerce account for more than 70% of the company's sales. Staff numbers have increased from just 50 in 1997 to over 300 and the company produces 30,000 pairs of shoes a week.