UK Fashion Manufacturers Sacrifice Margins to Secure Cash Flow Amid Sales Rebound

A new quarterly performance report indicates that sales growth and efficiency gains have enabled UK fashion manufacturers to "recover their margins and put them on a firm footing for 2026". The findings suggest a complex picture of strong sales recovery alongside strategic cost-cutting measures driven by ongoing economic pressures.

New figures from inventory management specialist Unleashed reveal that small- and mid-sized firms in the fashion sector experienced a notable rebound in Q3 2025 revenue from sales. On average, these businesses generated £500,517 during the quarter, representing an increase of nearly 5% compared to the previous quarter. However, this positive revenue trend was accompanied by a slight drop in profitability, with the gross margin percentage (GMP) falling by 2.5 percentage points quarter-on-quarter. The report attributes this margin pressure to changes in operational practices, including decreased purchasing volumes and stock on hand value, and significantly shortened lead times.

Joe Llewellyn, GM of ERP Small Business at The Access Group (Unleashed's parent company), characterized the last quarter as one defined by a "determined push towards efficiency." He noted that while sales revenue was healthy, it did not reach the high levels seen during the same period last year. Llewellyn pointed to a clear correlation between weakened demand—reflected in a contracted PMI for the period—and the resulting shift in manufacturer behavior. He explained that manufacturers "moved from cautious ‘just in case’ stock building in Q2 to a leaner ‘just in time’ approach, cutting their margins and stock on hand to protect their margins and cash flow." This strategic pivot resulted in lead times falling dramatically by 31% quarter-on-quarter (from 32 to 22 days), alongside significant drops in purchase orders (56%) and stock on hand (33.5%).

Looking ahead, Llewellyn emphasized that "operational excellence" would be crucial for success in a low-growth, high-cost environment. To navigate 2026 successfully, manufacturers will need to leverage data for forecast-driven replenishment, accurately track landed costs in real-time, and identify opportunities to convert excess stock into cash. He added that "doing more with less" represents the new reality for the industry, a trend underscored by the continued adoption of industrial automation to optimize processes.