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Economic Impact Assessment of
Cashmere Industry in Scotland
A Report Submitted to Scottish Enterprise National
Textiles Team
Economic Impact Assessment of
Cashmere Industry in Scotland
A Report Submitted to Scottish Enterprise National
Textiles Team
C3514 / September 2007
ECOTEC
Priestley House
12-26 Albert Street
Birmingham
B4 7UD
United Kingdom
T +44 (0)121 616 3600
F +44 (0)121 616 3699
www.ecotec.com
ECOTEC
Cashmere Industry in Scotland
Contents PAGE
Executive Summary................................................................................. i
1.0 Introduction............................................................................................. 1
1.1 Study Aims and Objectives .......................................................................................1
1.2 Study Drivers and Strategic Context ........................................................................1
1.2.1 The Scottish Textiles Industry ......................................................................................1
1.2.2 The Scottish Cashmere Industry ..................................................................................2
1.2.3 The Cashmere Club .....................................................................................................2
1.3 Study Approach..........................................................................................................3
1.4 Report Structure.........................................................................................................3
2.0 Scottish Cashmere: Industry Profile and Trends ................................ 5
2.1 Introduction ................................................................................................................5
2.2 Industry Profile ...........................................................................................................5
2.2.1 Business base ..............................................................................................................5
2.2.2 Employment .................................................................................................................6
2.2.3 Gross Value Added and Turnover ................................................................................7
2.3 Industry Structure ......................................................................................................8
2.3.1 Inputs ...........................................................................................................................8
2.3.2 Functional specialisation ..............................................................................................9
2.3.3 Workforce ...................................................................................................................10
2.3.4 Markets and products.................................................................................................11
2.3.5 Geographical composition ..........................................................................................12
2.4 Industry Trends ........................................................................................................14
2.5 Strategic Conclusions: industry profile and trends ..............................................15
3.0 Scottish Cashmere: Economic Contribution and Impact ................. 17
3.1 Introduction ..............................................................................................................17
3.2 Modelling Approach .................................................................................................17
3.2.1 Introducing the REMI-ECOTEC Model.......................................................................17
3.2.2 Applying the REMI-ECOTEC Model...........................................................................18
3.2.3 Inputs and Assumptions .............................................................................................19
3.3 Economic Impact Contribution ...............................................................................20
3.3.1 Total Economic Impact ...............................................................................................20
3.3.2 Economic Impact: Key Results...................................................................................21
3.3.3 Economic Impact: Sector Results...............................................................................21
ECOTEC
Cashmere Industry in Scotland
3.4 Strategic Conclusions: economic contribution and impact .................................22
4.0 Scottish Cashmere: Industry Prospects ............................................ 24
4.1 Introduction ..............................................................................................................24
4.2 Future Global Outlook .............................................................................................24
4.2.1 Cashmere: a growing market .....................................................................................24
4.2.2 Cashmere: a competitiveness challenge....................................................................25
4.3 Securing a Sustainable Industry.............................................................................26
4.3.1 Brand development ....................................................................................................26
4.3.2 High quality, niche markets ........................................................................................29
4.3.3 Design and flexibility...................................................................................................30
4.3.4 Skills and workforce ...................................................................................................31
4.3.5 Leadership..................................................................................................................32
4.4 Strategic Conclusions: industry prospects ...........................................................33
5.0 Conclusions and Strategic Findings .................................................. 36
5.1 Scottish Cashmere: Industry Profile and Trends ..................................................36
5.2 Scottish Cashmere: Economic Impact Contribution.............................................37
5.3 Scottish Cashmere: Industry Prospects ................................................................38
Annex One: Consultees ......................................................................... 1
Strategic Consultees..................................................................................................2
Business Consultees .................................................................................................2
Annex Two: Topic Guides...................................................................... 4
Cashmere Business Consultations – Topic Guide..................................................5
Cashmere Strategic Consultations – Topic Guide ..................................................8
Textiles Industry Survey 2007 .................................................................................11
Annex Three: REMI-ECOTEC Model ................................................... 21
REMI-ECOTEC Model ...............................................................................................22
ECOTEC
Cashmere Industry in Scotland
Executive Summary
Introduction
ECOTEC Research and Consulting Limited were appointed in July 2007 by Scottish
Enterprise to undertake an assessment of the cashmere industry in Scotland and its
importance to the Scottish economy.
Study Approach
In meeting the objectives of the study our research comprised a number of core
components:
• A focussed literature review
• A review and analysis of all relevant published data
• Application of a structural economic model, REMI-ECOTEC Model, to Scotland's
cashmere industry
• A programme of in-depth consultations with individual cashmere businesses, together
with strategic stakeholders
Scottish Cashmere: Industry Profile and Trends
A combination of official published sources, recent industry research and latest textiles
industry survey findings were employed to develop a summary portrait of the overall
performance profile of the cashmere industry in Scotland:
Profile Scottish cashmere industry
Business base There are 40+ companies fully or partially operating within the cashmere industry
The vast majority of cashmere businesses remain Scottish-owned
The majority of businesses may be classified as knitters (and weavers)
Although the majority of businesses are micro businesses (<10 employees), an
above average number comprise medium or large companies
The majority of companies in the industry are long-established businesses, with
more than one-half claiming to have been operating for 25+ years
Employment base As an analysis start point, and on the basis of (limited) official data, it may be
estimated that perhaps 3,500 – 4,000 employees are directly employed within the
cashmere industry
i ECOTEC
Cashmere Industry in Scotland
The majority of employees (3 in 4) are engaged in manufacturing production,
followed by general office and design / product development
Latest survey findings provide some evidence that employment levels may be
stabilising at the current time, with 8 out of 10 companies reporting employment
having either increased or else remained static over the previous 12 months
Geographical Cashmere businesses are notably concentrated in the Scottish Borders sub-region,
composition particularly in and around Hawick.
Survey results suggest that perhaps almost one-half of all direct employment is
located in the Borders
Glasgow and Edinburgh are a focus for particular industry functions, notably retail
and design
Performance 3 in 4 cashmere businesses indicated that their turnover has increased or else
remained static over the previous 12 months
Encouragingly, a similar proportion expect turnover to increase over the next 12
months
Compared to the textiles industry as a whole, productivity has reportedly increased
in a greater proportion of cashmere businesses
A majority of cashmere businesses claim to operate under a vertically integrated
structure
Markets Approaching 2 in 3 cashmere companies claim to operate internationally, selling
products and/ or services in export markets
The USA comprises the single largest export market for Scottish producers,
followed by Italy, France and Japan
Analysis of emerging industry trends suggest that significant future market
opportunities are likely to continue to develop for a flexible, innovative and dynamic
cashmere industry which is focussed on high quality, niche markets
Scottish Cashmere: Economic Contribution and Impact
We have applied a custom version of the REMI-ECOTEC Model to the economic
architecture of Scotland as a basis for further estimation and quantification of the overall
impact of cashmere to the national economy. In further seeking to overcome limitations of
officially published data, this analysis also incorporates elements of primary business data
as a basis for further providing the necessary inputs to the economic model.
• Our analysis reveals that the cashmere industry is a notably significant employer and
income contributor to the wider Scottish economy.
ii ECOTEC
Cashmere Industry in Scotland
• The direct employment contribution of Scotland's cashmere industry is estimated at
approximately 4,000 (4,027) jobs.
• Beyond this direct contribution, and including indirect and induced employment effects,
the total employment impact of cashmere to Scotland is estimated at more than 5,500
jobs.
• Cashmere's overall contribution – direct/ indirect/ induced - to Scotland's GDP is
equivalent to approaching £200 million per annum (approaching 0.2% of national GDP),
with this also representing just over £400 million in output per annum.
• As a significant employer in the Scottish economy, the cashmere industry is also
contributing in the region of £80 million per annum in terms of real disposable income
available to residents.
• In addition to its direct contribution, importantly, the cashmere industry also supports
jobs and output across a range of other sectors - including retail/wholesale and tourism-
related sectors, together with other textiles sub-sub sectors - through supply chain
linkages and employee expenditure effects.
Scottish Cashmere: Industry Prospects
Our analysis of emerging market trends and prospective industry developments is rooted
in or has otherwise been closely informed by the programme of consultations held with
individual businesses and other industry stakeholders in Scotland.
• The global market for cashmere continues to grow strongly. Whilst established markets
can be expected to continue to account for the larger share of sales, increasingly, a
number of major new geographical markets – including Russia - will further emerge.
• The continuing growth of low cost knitwear products from China and other developing
world producers will exert a dominant force in shaping future market demand for
cashmere.
• Reflecting these global industry pressures, and in recognition that they are unable to
compete directly on the basis of price, the industry in Scotland is necessarily
increasingly moving towards higher value, exclusive niche markets and specialised
production.
iii ECOTEC
Cashmere Industry in Scotland
• Central to securing a sustainable economic future for Scottish cashmere be
requirements for effective brand development and management; adopting a focus on
design creativity and flair; an emphasis on high quality, niche products; appropriate
workforce skills development; and strong strategic industry leadership.
• It will be contingent on producers to clearly differentiate Scottish cashmere product and
further develop strong brand image as a key mechanism for competitive return. Further,
and encouragingly, there is increasing recognition amongst Scottish producers of the
opportunities afforded through dedicated marketing and promotion of Scottish cashmere
as a distinctive 'national product', to the collective benefit of all in the indigenous
industry.
• A clear focus on high value, quality product will be essential if Scottish cashmere is to
successfully command a significant price premium in the global marketplace and is to
further differentiate Scottish quality products from commoditised mass produced
garment ranges.
• Scottish cashmere businesses also possess a strong awareness of the need to further
enhance the design element of their operations. As the industry becomes more
fashion-led, flexible manufacturing approaches incorporating custom design that can
respond quickly to changing consumer demands will be important in the development of
new contemporary designs and one-off product lines.
• The industry requires access to an appropriately skilled workforce, yet it is characterised
by a shrinking pool of locally available labour. As a short term response to this issue,
businesses are seeking to maximise the opportunities afforded by migrant workers.
Looking forward, it might be hoped that an improved industry image combined with an
increasing emphasis on higher value (and hence, higher pay) jobs will contribute to a
more closely attuned supply of skilled labour.
• As an industry body the Cashmere Club is generally viewed as both a desirable and
effective mechanism for articulating and acting on common issues confronting the
industry – a position which is underscored in light of the competitiveness climate facing
the industry. It can be anticipated that the continued success of the industry in Scotland
will be dependent to substantial degree on the future role of the Cashmere Club in
providing the required level of industry leadership and strategic direction.
iv ECOTEC
Cashmere Industry in Scotland
1.0 Introduction
1.1 Study Aims and Objectives
ECOTEC Research and Consulting Limited were appointed in July 2007 by Scottish
Enterprise to undertake an assessment of the cashmere industry in Scotland and its
importance to the Scottish economy.
Scottish Enterprise in consultation with the industry requires a clear profile of the economic
impact of the Scottish Cashmere industry to the national economy. Specifically, the Study
Brief1 notes that research should encompass the following components of impact
assessment:
• Employment numbers (direct and indirect)
• Industry turnover
• Industry productivity
• Contribution to Scottish GDP
• Analysis of the relative importance of the cashmere industry to the Scottish economy
Notwithstanding knowledge of wider industry movements, Scotland's cashmere industry is
difficult to disentangle and assess on the basis of official data and sector definitions. This
study is directed at establishing a robust set of estimates for the economic contribution of
cashmere to Scotland.
1.2 Study Drivers and Strategic Context
1.2.1 The Scottish Textiles Industry
Cashmere forms part of a wider textile industry. Latest figures indicate that Scotland's
textiles sector accounts for over £1bn sales turnover, with an export value in the region of
£390m2. Textiles sector employment accounts for approximately 6% of all jobs in
manufacturing in Scotland. The latest industry survey3 paints a generally upbeat picture of
the industry as a whole, highlighting a relatively high value added industry, experiencing
improved performance, increased integrated of design and processing; greater value add
from design led activity and stable employment, albeit proportionally less in manufacturing.
1
Invitation to Tender: Economic Impact Assessment of Cashmere Industry in Scotland, (2007), Scottish Enterprise
2
Figures quoted in Scotland at the Cutting Edge: A Strategy for the Textiles Industry in Scotland, 2007 – 2010, (2007),
Scottish Enterprise
3
Scottish Textiles Industry Report, (2005), Scottish Enterprise
1 ECOTEC
Cashmere Industry in Scotland
It is the case that the Scottish textiles industry continues to undergo major structural and
market transformation. The sector has had to respond to a range of global market factors,
including sustained price pressures on raw materials; increasing global competition from
low cost producer nations; and international textile and trade agreements manifested in
further market liberalisation and the removal of tariffs and quotas. Moreover, and in
addition to these competitiveness challenges, the industry continues to face long-standing
skills issues.
In response to these pressures, the goal for the Scotland's textile industry is one of
building a 'flexible, innovative and dynamic industry characterised by leading design and
R&D and globally recognised brands'4. Achieving this aim will demand a clear focus on
exploiting the distinctive strengths of the indigenous industry, including, critically, an
emphasis on developing a high quality, niche market-oriented sector operating in a global
market.
1.2.2 The Scottish Cashmere Industry
Cashmere, a high quality, luxurious fabric, has a long history of production in Scotland.
Stemming from its reputation for producing high quality fashion items in the 1920s5, the
Scottish cashmere industry continued to maintain global recognition for its high quality
products. Scotland is one of only two areas in the world (the other being Italy) where high
quality knitted cashmere is produced with significant demand from abroad for the 'Scottish
brand'6. Moreover, and given this reputation for quality, Scottish cashmere has a
potentially powerful role to play in terms of further enhancing the international reputation of
Scottish luxury products more widely.
As an important constituent of the textiles industry, the economic effects of the Scottish
cashmere industry would appear pervasive - spanning manufacture of clothing and
knitwear apparel; global exports; the design industry and high fashion. However, and
notwithstanding the recognised economic significance of the industry, currently there exist
no reliable estimates as to the overall value or contribution of cashmere to the Scottish
economy7.
1.2.3 The Cashmere Club
Positively, and in light of the global competitive pressures facing Scottish cashmere, the
industry has been quick in recognising the pressing need for producers and businesses to
4
Scotland at the Cutting Edge: A Strategy for the Textiles Industry in Scotland, 2007 – 2010, (2007), Scottish Enterprise
5
Evaluation of Cashmere Made in Scotland Promotion, 2001 – 2003 (2003), Scottish Enterprise Borders
6
Scotland at the Cutting Edge: A Strategy for the Textiles Industry in Scotland, 2007 – 2010, (2007), Scottish Enterprise
7
A nominal figure of £115m per annum has been suggested by the Cashmere Club. Quoted in The Scotsman 7/2/05,
and a BBC article dated 9/1/06
2 ECOTEC
Cashmere Industry in Scotland
work together in the form of a single industry body directed at sustaining, growing and
promoting the Scottish cashmere industry: in short, repositioning cashmere in the global
marketplace. Following accepted best practice for an industry association the Scottish
Cashmere Club was established in 1998 as a limited company. It has sought to provide a
forum for promoting the Scottish cashmere industry as a whole; to develop and operate a
brand to differentiate high-quality products; to educate retailers; and to take a co-ordinating
role in export promotion. Critically, the Cashmere Club has sought to provide currency to
the 'Cashmere Made in Scotland' label, as a sign of quality assurance, embodying heritage
and exacting standards in all Scottish cashmere garments.
1.3 Study Approach
In meeting the aim and objectives of the study our research has comprised of a number of
component tasks:
• An inception meeting plus interim and final reporting meetings held with the Client
Group.
• A focussed literature review including policy and strategic documents together with all
relevant existing research and industry reports.
• Review and analysis of all relevant published data, including secondary and primary
data held by the Client Group and partner organisations, in relation to the cashmere
industry.
• Application of a structural economic model, REMI-ECOTEC Model8, to Scotland's
cashmere industry as a basis for further estimating and quantifying the economic
contribution of the cashmere industry to Scotland.
• A programme of in-depth consultations with individual cashmere businesses, together
with strategic stakeholders, to further establish and extend key sources of industry
information and gather additional industry insights (See Annex for full list of consultees).
The results of this process have also been informed by ECOTEC's wider experience of
undertaking assessments of the economic benefits and impact of a range of industries,
economic assets and infrastructure.
1.4 Report Structure
The remainder of the report is structure as follows:
8
The REMI–ECOTEC Model is a sophisticated impact and policy simulation model. It can be used to predict the
economic impact of industries, assets, interventions and trends.
3 ECOTEC
Cashmere Industry in Scotland
• Section 2: Scottish Cashmere: Industry Profile and Trends – provides an analysis of the
composition and structure of the industry in Scotland taken as a principal component of
textiles and associated sectors – including in terms of its business base, employment
characteristics and geographical representation.
• Section 3: Scottish Cashmere: Economic Impact Contribution - incorporating primary
research and business data as inputs, this section applies ECOTEC's REMI Model to
the current economic architecture of Scotland as a basis for estimation and
quantification of the overall impact contribution of cashmere to industry to Scotland.
• Section 4: Scottish Cashmere: Future Industry Prospects – draws extensively on the
programme of consultations held with businesses and industry partners and considers
industry prospects and areas of likely market opportunity for Scottish producers and
others involved in the indigenous cashmere industry.
• Section 5: Scottish Cashmere: Strategic Conclusions - summarises key findings of the
study and further highlights the specific contribution that cashmere makes to the
Scottish economy.
The report is also supported by the following annexes:
• Annex One: Consultees – details of all individual companies and industry stakeholders
consulted as part of the study.
• Annex Two: Topic Guides – copies of the topic guides used as the basis for the study
consultations - including the Scottish Textiles Industry Survey questionnaire9.
• Annex Three: REMI-ECOTEC Model – further information relating to the REMI-
ECOTEC Model.
9
The Textiles Industry Survey was undertaken concurrently with the Cashmere Impact Study, with the Textiles Industry
Survey serving as a key mechanism for obtaining additional company information on specific cashmere-related
businesses in Scotland.
4 ECOTEC
Cashmere Industry in Scotland
2.0 Scottish Cashmere: Industry Profile and Trends
2.1 Introduction
To the extent that cashmere may be most readily identified as a key constituent of
Scotland's textiles industry, this section of the report presents an analysis of Scottish
cashmere – in terms of essential profile, structure, and trends - set within the broader
context of the Scottish textiles sector. Together with published, official data, a key source
of up-to-date information informing this analysis is provided by the Scottish Textiles
Industry Survey (conducted during August 2007), with this Survey also having
encompassing a sizeable sample of cashmere businesses based in Scotland. The
information and analysis presented in this section provide the necessary springboard for
our further research directed at more accurately identifying the particular contribution and
impact of Scottish cashmere to the national economy.
2.2 Industry Profile
In developing a consistent and transparent statistical industry baseline, it is important to
recognise at the outset the limitations of readily available data. A workable definition and
measurement framework is subject to the practical considerations of working with official
data sources and the Standard Industrial Classification (SIC). Although far from perfect,
the SIC remains the only robust UK wide system of classification. However, it is the case
that no single overarching definition for the Scotland textiles industry – or indeed the
cashmere industry - has been consistently applied in the past, with a number of different
definitions having been utilised.
2.2.1 Business base
In terms of businesses the Scottish textiles industry overall is estimated to comprise
approximately 450 - largely independent - enterprises10. With few notable exceptions, the
industry is characterised by a small firm sector profile: over 80 per cent of business
establishments can be classified as small enterprises possessing fewer than 50
employees11.
With regard to the ownership structure of textile companies located in Scotland, the most
recent survey conducted by Scottish Enterprise12 found that 48 per cent of businesses
10
Scottish Textiles Industry Summary Report, (2005), Scottish Enterprise
11
ibid
12
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
5 ECOTEC
Cashmere Industry in Scotland
were wholly Scottish owned and operated exclusively within Scotland; 43 per cent were
Scottish owned but operated outside Scotland; and a further 8 per cent were non-Scottish
owned13 (although in these cases it is suggested that a high level of strategic decision-
making remained within Scottish based management teams). Likely reflecting their size
profile, foreign owned companies have tended to outperform industry averages on the
basis of financial turnover and profitability14.
The latest Scottish Enterprise survey also revealed that 70 per cent of textile companies
are relatively long-established, having been operating for a period of 11 years or more -
though this average age does vary appreciably according to individual business type or
principal activity. Those companies predominantly involved in manufacturing have a clear
tendency to be among the longest established operations. Conversely, those
organisations involved only in design comprise a notably younger base of companies.
According to Scottish Enterprise's own industry database of companies, there are some 43
companies fully or partially operating within the cashmere industry in Scotland, with
approximately 12 of these businesses being represented within the Scottish Cashmere
Club. The Annual Business Inquiry (ABI) indicates that whilst firms with 10 employees or
less (i.e. micro-businesses) account for more than 60 per cent of companies in the
cashmere industry15, the industry is nevertheless characterised by a relatively high
proportion of medium-sized and large companies (50 or more employees) – approaching
20 per cent compared with the Scottish average of 4.5 per cent for all sectors.
The most recent (2007) Scottish Textiles Survey would tend to reinforce the view that
many businesses in the cashmere industry are long-established in Scotland, with 58 per
cent of companies having operating for a period of 26 years of more16. The majority (84%)
of cashmere businesses located in Scotland remain Scottish owned.
2.2.2 Employment
The textiles industry in Scotland has been subject to significant restructuring and
employment decline over many years. ECOTEC reported in 2005 that employment had
reduced from 33,000 to 17,000 between 1998 and 200217, with this rate of job losses
having proceeded at a notably faster rate than that which had been previously predicted18.
Scottish Enterprise Textiles Team's latest figures also estimate that the Scottish textiles
13
1.2% responses indicated 'Don't know'
14
ibid
15
Annual Business Inquiry (data units); based on 'best fit' SIC code definition
16
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
17
Evaluation of Intervention with Clusters and Industries, (2005), ECOTEC
18
According to projections prepared by Cambridge Econometrics textiles industry employment was forecast to fall to a
level of 20,000 by 2010
6 ECOTEC
Cashmere Industry in Scotland
industry employs 17,000 people19 - though, again, it should be noted that there remain
some disparities in terms of the definitional basis of the industry that has adopted by
different studies.
Nevertheless, recent (2007) survey figures do provides some evidence to suggest that
industry employment levels may be stabilising at the current time, with 8 out of 10
companies reporting that employment had either increased or else remained static over
the previous 12 months20 - although, again, this would appear contrary to the recent
employment and GDP trends indicated by the latest official statistics21.
As an analysis start point, and using latest available ABI (2005) data, it may be estimated
that the cashmere industry in Scotland perhaps directly employs somewhere in the region
of 3,500 – 4,000 people22. Compared against similar figures for 1998 this would suggest a
substantial decline (an approximate halving) in industry employment, although defined on
this basis jobs reduction since 2003 has been relatively modest. Positively, two in three
(63%) cashmere businesses surveyed indicated that employment levels had either
increased or remained static over the previous 12 months, with 84 per cent predicting that
employment levels would increase or else remain static over the following 12 months23.
2.2.3 Gross Value Added and Turnover
Scotland's textiles industry is estimated to account for some £1,084m in turnover (3% of
total manufacturing turnover)24. Further, official statistics published by ONS suggest that
the manufacture of textiles and textile products generated GVA to the value of £344 million
for Scotland in 2004: a figure apparently less than half that attributed to the industry in
1998 (£710 million). Importantly, however, this GVA figure comprises an estimate of direct
contribution only, and as such does not cover certain types of businesses and economic
activities connected through the industry value chain, including wholesalers and retailers.
Textiles industry productivity (as measured by GVA per employee) is estimated to have
increased by 12 per cent during the last 5 years – though at £28,700, the figure remains
appreciably below the average for other manufacturing industries.25
19
Scotland at the Cutting Edge: A Strategy for the Textiles Industry in Scotland 2007-2010, (2007), Scottish Enterprise
20
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
21
ABI (2006) and Quarterly GDP Index (2006, Q3)
22
The cashmere industry has been defined as incorporating components of the following SIC codes: 17.1 Preparation
and spinning of textile fibres; 17.2 Textile weaving; 17.3 Finishing of textiles; 17.6 Manufacture of knitted and crocheted
fabrics; 17.7 Manufacture of knitted and crocheted articles; and 18 Manufacture of wearing apparel; dressing and dyeing
of fur.
23
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
24
Scotland at the Cutting Edge: A Strategy for the Textiles Industry in Scotland 2007-2010, (2007), Scottish Enterprise
25
The GVA per employee figure for the manufacturing sector overall is £49,600
7 ECOTEC
Cashmere Industry in Scotland
Latest survey findings indicate that more than 1 in 4 (28%) Scottish textiles companies
currently have sales turnover of in excess of £1m, with approximately 1 in 5 reporting
turnover of over £5m. Positively, 2 in 5 (40%) businesses reported a turnover increase
over the previous 12 months, as against 31% who indicated that turnover remained the
same and 21% for whom turnover declined. Looking forward, 2 in 3 (64%) anticipated that
their turnover would increase over the next three years26.
Within the cashmere industry, some 68 per cent of businesses reported a turnover of more
than £200k over the previous 12 months, with 26 per cent exceeding £10m. Some 3 in 4
(74%) of businesses indicated that their turnover had increased or else remained static
over the previous 12 months. Encouragingly, a similar proportion (74%) expecting their
turnover to increase over the next 12 months. Significantly, more than 2 in 3 (69%) of
cashmere businesses also claimed that they had experienced productivity increases,
compared to just less than half of businesses across the textiles industry as a whole27.
2.3 Industry Structure
Typically, the transformation of raw cashmere fibre to finished article involves a multitude
of different activities and industrial processes. Key stages in the production process
include:28
• Collection – cashmere fibres are collected by either combing or shearing the goat during
the moulting season.
• Sorting & Scouring – after hand sorting for coarse hair the fibre is washed to remove
dirt, grease and any vegetable matter gathered in the collection process.
• Spinning, Dying– the cashmere fibre is spun into yarns and then dyed.
• Weaving or Knitting – the yarns are weaved or knitted to produce cashmere garments
and products.
A relatively small proportion of Scottish producers are directly involved in spinning, with the
bulk of the Scottish cashmere industry is focussed around the latter stage of cashmere
production – weaving and, especially, knitting.
2.3.1 Inputs
Raw cashmere fibre is sourced from the Cashmere or down goat: specifically the fine, soft
undercoat or underlayer of hair (as opposed to the straighter and coarser outer coat, called
guard hair). Cashmere goats are specially bred to produce a high amount of fibre with
26
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
27
ibid
28
The Cashmere and Camel Hair Manufacturers Institute – www.cashmere.org
8 ECOTEC
Cashmere Industry in Scotland
fewer guard hairs and are most commonly found in the high plateaus of Asia where
optimal climatic conditions exist. The raw cashmere fibre used by the industry is,
therefore, most commonly imported from either China or Mongolia29.
Within Scotland, the majority of businesses source their cashmere from Scottish spinners
Todd & Duncan - who, in turn, source their raw fibre from China. Todd & Duncan are
considered to be one of the world's leading cashmere yarn spinners, with Scottish
manufactures identifying 'quality' and (range of) 'colours' as principal reasons for using
Todd & Duncan as suppliers. On occasions Scottish businesses also source their
cashmere from Z Hinchliffe and Son, Johnstons of Elgin, and a number of Italian suppliers.
2.3.2 Functional specialisation
The Scottish textiles industry is characterised by a complex product development chain.
Manufacturing and design are the most prevalent functions amongst businesses. By
assigned businesses to specific industry categories covering all components of the
development chain, it is possible to show that a strong degree of vertically integration
characterises the industry: less than one-third (32%) of companies only operate in one
area of the industry value chain compared to 41% who operate in manufacturing, design,
wholesale and/or retail30 (Figure 2.1).
29
The Scottish Cashmere Producers Association (www.cashmere-scotland.co.uk)
30
The remaining businesses were classified as: Other, but predominantly manufacturing, 6.1%; Other, but predominantly
design, 1.8%; and Other, but predominantly wholesale and/or retail, 6.1%.
9 ECOTEC
Cashmere Industry in Scotland
Figure 2.1 Vertical integration within the Scottish textiles industry
Arguably, the cashmere industry in Scotland exhibits an even greater level of vertical
integration, with over one-half of businesses operating in manufacturing, design and
wholesale and/or retail31.
2.3.3 Workforce
Aligned to this functional specialisation, latest survey findings indicate that almost 1 in 3
(30%) industry employees are now engaged in non-manufacturing/ production jobs.
Through application of formal occupational classifications, survey evidence suggests that
some 13% of employees in the Scottish textiles sector may be officially categorised as
being employed in higher value jobs at the current time.32 However, importantly, given the
particular workforce characteristics of the textiles sector it is likely an appreciably greater
proportion of highly skilled employees active in the industry are unlikely to be captured
31
The remaining businesses were classified as: 'Other, but predominantly Manufacturing' (5.3%); and, 'Other but
predominantly Wholesale and/ or Retail' (10.5%).
32
Classified as Managerial, Professional or Associate Professional occupations (SOC)
10 ECOTEC
Cashmere Industry in Scotland
under this definition. Furthermore, although average wages in the textile sector remain
below the Scottish average, it is the case that this gap has now reduced significantly33.
Within the Scottish cashmere industry, survey results suggest that the majority (76%) of
employees are engaged in manufacturing, followed by general office (6%)34 and design/
product development (5%)35.
2.3.4 Markets and products
Against a backdrop of ever-increasing globalisation there has been growing recognition on
the part of the Scottish textiles industry of the necessity for greater internationalisation of
operations and market activities. As of 2007, well over one-third of textiles companies
(39%) reported selling products internationally, with the main international markets
identified as being the USA, France, Germany, Italy and Japan36.
Reflecting this increasing internationalisation, the textiles sector comprises a notable
export performer.37 As at 2005 textile exports stood at £340 million,38 with the textiles
industry accounted for approximately 3 per cent of manufacturing exports. Data indicates
that since 2002, textiles exports have been falling (a decrease of around 7%), albeit less
than manufacturing as a whole (a decrease of 10%). However, more recently there are
signs that textiles exports are showing signs of stabilising39. Given that the decline in
textile exports has been less than the fall in textile GDP (a decline of 35% between 2002
and 2006) suggests that textile exports may be more specialised and higher value than the
textile output consumed domestically.
As of 2007, approaching two in three (63%) Scottish cashmere businesses reported selling
products or services internationally. Of this body of companies trading internationally, two-
thirds (67%) obtained more than 50 per cent of their total sales in international markets.
The USA was most commonly identified as the main international market; other key
markets included Italy, France and Japan40.
33
www.scottish-enterprise.com
34
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
35
ibid
36
ibid
37
Scotland at the Cutting Edge: A Strategy for the Textiles Industry in Scotland 2007-2010, (2007), Scottish Textiles
38
Global Connections Survey
39
Textiles Analysis, (2007), Scottish Executive
40
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
11 ECOTEC
Cashmere Industry in Scotland
2.3.5 Geographical composition
The textiles industry is notably strongly concentrated in the Borders, together with East
Ayrshire, Angus and Renfrewshire41. In combination these four areas account for over half
of all textiles employment42. The latest survey43 also identifies Glasgow and Edinburgh as
notable areas for particular industry functions, including retailers and designers. Together
with the Borders area, manufacturing and production employment is centred on East
Ayrshire and Perth and Kinross, whereas significant components of design and product
development employment are based in Glasgow and Fife. Almost half of retail
employment is in the Borders, followed by Aberdeen, Fife and Edinburgh44.
Although it is the case that many areas have experienced some measure of textiles sector
job losses during recent years, the Borders, possessing by far the single largest
concentration of textiles employment, actually recorded a slight increase in employment
between 1998 and 200445.
Notably, cashmere businesses also have a clear tendency to cluster within the Borders
sub-region (Figure 2.3). More specifically, there is a high concentration of cashmere
businesses in and around the principal centre of Hawick (Figure 2.4). The reasons behind
this geographical concentration are in large part historical, and connected to the origins
and early development of the industry, though access to specialized labour and supply
inputs continues to represent significant locational criteria for many Borders-based
companies. Ayr, Elgin and Kinross may also be identified as significant locations for the
cashmere industry, with the latter two a focus for Scottish cashmere yarn spinning46.
41
Scotland at the Cutting Edge – A Strategy for the Textiles Industry in Scotland, 2007 – 2010, (2007), Scottish
Enterprise
42
Calculated on the basis of ABI data
43
Scottish Textiles Industry Survey, (2007), Scottish Enterprise
44
ibid
45
ABI data
46
Evaluation of Cashmere Made in Scotland Promotion, 2001-2003, (2003), Scottish Enterprise Borders
12 ECOTEC
Cashmere Industry in Scotland
Figure 2.2 Location of cashmere businesses in Scotland
Source: ECOTEC Research & Consulting, based on Scottish Enterprise national database of textile companies
Figure 2.3 Location of cashmere businesses in the Scottish Borders
Source: ECOTEC Research & Consulting, based on Scottish Enterprise national database of textile companies
13 ECOTEC
Cashmere Industry in Scotland
Based on a 'best fit' SIC code definition of the cashmere industry in Scotland, data reveals
that almost half of all direct employment is located in the Borders, representing almost 5
per cent of the sub-region's total employment base. Now home to a single major
cashmere producer (Ballantyne Cashmere), Innerleithen, like Hawick, retains a heavy local
dependence on the cashmere industry.
2.4 Industry Trends
It is evident that the Scottish textiles industry as a whole has undergone substantial
structural change and economic adjustment during recent years. Among the wider trends
affecting the industry a number would appear particularly relevant in relation to cashmere
producers in Scotland. These include:
• Enhanced Competition – in common with many manufacturing industries the textiles
industry has faced the effects of increased global competition from low cost producers
in developing economies. As a relatively labour intensive industry, this has tended to
place countries with comparatively high labour costs, such as Scotland, at a competitive
disadvantage.
• Greater Trade Liberalisation - the WTO's Multi Fibre Agreement, which limited trade
barriers faced by developing countries exporting textile products to Western nations
expired in 2005. Although both the EU and USA implemented 'safeguard' quotas in
2005 as a mechanism against sudden surges in textile imports, notably from China, a
continuing trend towards greater trade liberalisation can be expected to put further
pressure on Scottish producers.
• Out-Sourcing Production - beginning as early as the 1980s (to Portugal etc), but now
becoming increasingly common, a trend within the industry for out-sourcing major
components of production outside Scotland. Labour intensive manufacturing production
activities are being placed in low labour cost countries, with a growing emphasis on
outsourcing to China, India and South East Asia47.
• Specialised Markets –in the face of lower production costs of developing economies
Scottish textile manufactures have increasingly been required to re-direct their
commercial focus in order to maintain a competitive market position. Indeed, the UK
Government’s Textile and Clothing Strategy Group (TCSG) has redefined the viable
success areas for the industry away from mass market clothing manufacture to
47
Evaluation of Intervention with Clusters and Industries – Textiles, (2005), Scottish Enterprise
14 ECOTEC
Cashmere Industry in Scotland
“creativity, design and high quality niche product manufacturing in a fast response
fashion environment”48.
• Emphasis on Quality – hand-in-hand with a focus on specialised, niche markets has
emerged an increasing emphasis on differentiation of Scottish product through 'quality'
attributes. In many cases this is dictating a strong component of design innovation
underpinning the production process (frequently supported by greater capital
investment), allied to careful product branding and marketing activities.
• New Markets – positively, whilst Scottish producers are already established in a number
of mature markets (most notably the United States, but also Italy, France, Germany and
Japan), increasingly, new areas for export and international market penetration are
emerging on account of increasing affluence in nations such as Russia, China and
certain South America countries.
Whilst it is the case that the industry trends outline above have served to precipitate a
general decline in overall employment levels in the Scottish cashmere industry, together
with a reversal in fortunes of selected individual companies, it should also be apparent that
there are some cautious grounds for future optimism for the industry. In particular, there
are likely to be significant market opportunities for a flexible, innovative and dynamic
cashmere industry that can successfully adopt a clear focus on high quality, niche
products which further enhance and play to Scotland's long-standing reputation for quality.
On the basis of our industry consultations, these are issues which we return to and explore
further in Section 4 of this report.
2.5 Strategic Conclusions: industry profile and trends
Our strategic conclusions in relation to cashmere industry profile and trends are as follows:
• There are upwards of 40 principal companies operating within the cashmere industry in
Scotland. Typically, these businesses are long-established with a large proportion
remaining Scottish owned.
• On the basis of (limited) official data sources it may be estimated that the cashmere
industry in Scotland employs perhaps 3,500 – 4,000 people. Notwithstanding recent
trends towards further job losses, there is some evidence to suggest that employment
levels may now have stabilised, with survey findings tending to reveal a cautiously
optimistic outlook for Scottish cashmere producers.
48
As quoted in 'Making it Happen' (2002), Textile and Clothing Strategy Group, DTI
15 ECOTEC
Cashmere Industry in Scotland
• On average, cashmere businesses are reporting higher turnover than for the textiles
industry as a whole: for 3 in 4 businesses turnover is expected to increase over the next
12 months. Similarly, and in comparison to the wider textiles industry, productivity has
apparently increased among a greater proportion of cashmere businesses.
• Knitters remain the principal body of the Scottish cashmere industry. Comparatively few
businesses are engaged in spinning – though Todd & Duncan represent a notable and
important exception in this regard, particularly given their role as a supplier of yarn to a
large proportion of Scottish cashmere producers.
• Over half of businesses within the cashmere industry operate to some degree within a
vertically integrated structure (i.e. operating in manufacturing, design and wholesale
and/ or retail). Employment functions within the cashmere industry broadly tend to
reflect those of the wider textiles industry, with the majority of employees engaged in
manufacturing, followed by general office and design/ product development.
• Positively, an increasing number of Scottish cashmere companies are now operating
internationally. Main international markets have been identified as the USA, Italy,
France and Japan.
• Geographically, the cashmere industry remains notably concentrated within the Borders
sub-region, with data suggesting that almost half of all direct employment is located in
the Borders.
• The industry has undergone substantial structural change and economic adjustment
during recent years. In response to increasing global competition, there have been
moves towards out-sourcing production, an increasing emphasis on quality, and a move
towards more specialised markets.
• Although the cashmere industry has experienced a significant recent employment
decline, latest evidence would tend to suggest a degree of optimism existing within the
industry at the current time. Moreover, there are likely to be significant future market
opportunities for a flexible, innovative and dynamic cashmere industry which is focused
on high quality, niche markets.
16 ECOTEC
Cashmere Industry in Scotland
3.0 Scottish Cashmere: Economic Contribution and
Impact
3.1 Introduction
In this section of the report we apply the REMI-ECOTEC Model to the current economic
architecture of Scotland as a basis for estimation and quantification of the overall
contribution and impact of the cashmere industry to the national economy. We set out and
discuss the nature of 'direct' inputs employed, together with the key modelling assumptions
that underpin our analytical approach. Importantly, and in further seeking to overcome
some of the limitations of officially published data, our analysis also incorporates elements
of primary business data as a basis for further providing the necessary 'bottom up' inputs
to the economic model.
3.2 Modelling Approach
A key requirement of the study involves provision of an accurate assessment of the current
economic contribution of the cashmere industry to Scotland. In undertaking a review of
existing data and analyses a number of shortcomings and methodological limitations were
highlighted in the preceding section connected to the available evidence base for
estimating current economic contribution. In seeking to overcome these data gaps and
deficiencies of previous economic analyses, and in order to establish a fully updated and
consistent view of current impact to Scotland, we have applied a specially configured
version of the REMI-ECOTEC Model to the study.
3.2.1 Introducing the REMI-ECOTEC Model
The REMI-ECOTEC Model is a powerful and highly specified spatial economic model
which has been calibrated to reflect the particular economic conditions and circumstances
of Scotland. It features capabilities for economic forecasting, impact assessment, policy
analysis and simulations. As a structural model, it explicitly includes cause-and-effect
relationships, with the forecasting and policy analysis system including key econometric
estimates and inter-industry transactions, long run equilibrium features, as well as new
economic geography elements. It includes: substitution among factors of production in
response to changes in relative factor costs; economic activity rate responses to changes
in wage and employment conditions; consumer consumption responses to changes in real
17 ECOTEC
Cashmere Industry in Scotland
disposable income and commodity prices; and local, regional, and market share
responses to changes in production costs and agglomeration economics49.
Whilst the Model can be used to generate a forecast for the future of a particular economy
(a 'control forecast'), critically, it can also forecast the effects in that same economy when
a change – such as an economic 'shock' or injection - is implemented by the user (an
'alternative forecast' or simulation). In short, the difference between these two forecasts
represents the net effect of the specific initiative or intervention in question. This is
illustrated graphically in Figure 3.1 below. The Model enables the user to choose which
input variables to be included in a particular simulation. This option allows for the running
of multiple simulations with different combinations of variables included. Doing so isolates
the specific impact of individual variables.
Figure 3.1 REMI-ECOTEC Model: impact modelling simulations
3.2.2 Applying the REMI-ECOTEC Model
Given the structural characteristics of the Model we have adopted a counterfactual
approach to modelling the current contribution of the Scottish cashmere industry. As
49
Additional technical information on the Model is provided in the report annex
18 ECOTEC
Cashmere Industry in Scotland
mentioned above, the REMI-ECOTEC Model makes use of a baseline forecast, one which
presents a forward projection of the economy across a wide range of measures –
employment, GDP, workforce etc – with no random changes or 'shocks'. In order to
assess the net effect of changes in a particular industry, inputs related to the industry in
question are typically added to the baseline. These inputs then form the basis for running
a simulation using the Model in order to assess resultant effects across the economy as a
whole. However, given that the cashmere industry is long established and has been an
integral component of the Scottish economy for many years, it is already represented in
the Model's baseline forecast. It follows therefore, that adding inputs relating to the
cashmere industry on top of the baseline would in effect be double counting its
contribution.
In order to get around this misinterpretation, a counterfactual approach subtracts out the
'shock' (impact) of the cashmere industry, and looks at the economic footprint left behind.
In other words, instead of the misleading results attained by looking at a positive shock of
a replication of the current industry, negative shocks that mimic that of the cashmere
industry are input into the Model. The results represent the absolute value of the industry's
contribution to the Scottish economy.
3.2.3 Inputs and Assumptions
The principal data inputs and modelling assumptions that have formed the basis for
estimating and quantifying the current economic contribution of the cashmere industry are
summarised below. Most specifically, such data inputs relate to the identified direct50
contribution of the industry.
Model Inputs: Direct Effects
• As at 2005, it was estimated that the Scottish cashmere industry directly
accounted for 4,027 jobs and some £263 million in turnover.
• With purchases of intermediate goods and services amounting to some
£171 million, the direct contribution of the cashmere industry in respect of
GDP was estimated at approximately £93 million51.
50
'Direct' economic effects refer to employment or income which is wholly or predominantly related to the operation of
principal industry business establishments (1st round effects).
51
Direct effects have been estimated using a combination of separate data sources. Central to this process have been
the results of a data matching exercise of individual Scottish cashmere companies against company data records held
through the ABI, with this process yielding estimates for aggregate direct employment, turnover and gross value added
19 ECOTEC
Cashmere Industry in Scotland
3.3 Economic Impact Contribution
3.3.1 Total Economic Impact
The total economic impact of cashmere to Scotland has been estimated using the Model.
The total economic impact can be taken to represent a summation of direct, indirect and
induced effects:
• Direct Effects – initial employment/ income changes (1st round)
• Indirect Effects – procurement/ supply chain effects (2nd round)
• Induced Effects – household expenditure effects (3rd round)
Total impact is best expressed by reference to the key measures of Employment, Gross
Domestic Product (GDP), Output, and Real Personal Disposable Income (RPDI). These
measures are more fully defined in the table below.
Table 3.1 Headline Economic Measures
Measure Definition
Employment Comprises estimates of the number of jobs, full-time
and part-time, by place of work. Includes employees
and self employed.
Gross Domestic Product (GDP) GDP represents a measure of the total economic
activity in an economy. It is equal to output excluding
the intermediate inputs, and represents value added
(i.e. wage compensation and profits).
Output Output is the amount of production, including all
intermediate goods purchased as well as value
added. It can also be thought of as sales or supply.
Real Personal Disposable Income Personal income represents the sum of wages and
other sources of income. RPDI per capita represents
average income received after deductions for tax and
adjustments for inflation.
across a selection of Scottish cashmere companies. By scaling up this sample data was used as a basis to estimate
direct effects of the industry as a whole. Importantly, direct industry effects were further identified and validated through
reference to other official published statistics (ABI/ Scottish Executive I-O table); primary business data obtained through
industry consultations; and proprietary business database information (Experian).
20 ECOTEC
Cashmere Industry in Scotland
3.3.2 Economic Impact: Key Results
Headline impacts relating to the total economic contribution of cashmere are summarised
below:
Table 3.2 Total Economic Contribution52: Scottish Cashmere Industry
Scotland
Employment (no. jobs) 5,537
GDP (million £) £181
Output (million £) £401
Real Disposable Income (million £) £76
Source: REMI-ECOTEC Model, 2007
In summary:
• Including indirect and induced effects, it is estimated that the cashmere industry
currently supports in excess of 5,500 jobs (5,537) in Scotland overall – equivalent to
more than 0.2% of total employment in Scotland, or approximately 2% of all
manufacturing employment in Scotland.
• Including indirect and induced effects, the cashmere industry contributes approaching
£200 million to Scotland's national GDP per annum (equivalent to approximately 0.2%
of national GDP), with this representing over £400 million in respect of output (sales).
• With regards to the real disposable income available to residents, in terms of total
economic contribution Scotland's cashmere industry contributes nearly £80 million per
annum.
3.3.3 Economic Impact: Sector Results
In terms of the industry's employment impact, it is apparent that on account of supply chain
and income purchasing effects Scotland's cashmere industry effectively supports
additional jobs across a considerable range of sectors (see Table 3.3).
52
i.e. summation of direct, indirect and induced effects
21 ECOTEC
Cashmere Industry in Scotland
Table 3.3 Employment impact (indirect and induced): selected sectors, Scotland
Indirect and Induced
Employment Impact
Sector number percent53
Textiles 549 36%
Retail and Wholesale 175 12%
Construction 157 10%
Hotels and Restaurants 113 7%
Other Business Services 84 6%
Recreational, Cultural and Sporting 54 4%
Source: REMI-ECOTEC Model
Notably, the cashmere industry has particularly strong functional economic linkages with a
number of other textiles sub-sectors, retail/wholesale and related tourism sectors, together
with business services activities.
3.4 Strategic Conclusions: economic contribution and impact
Our strategic conclusions relating to the economic impact of the cashmere industry to
Scotland are as follows:
• Our analysis reveals that in overall terms the cashmere industry is a notably significant
employer and income contributor to the wider Scottish economy.
• The direct employment contribution of Scotland's cashmere industry is estimated at
approximately 4,000 jobs.
• Beyond this direct contribution, and including indirect and induced employment effects,
the total employment impact of cashmere to Scotland is estimated at in excess of 5,500
jobs.
• Cashmere's overall contribution to Scotland's GDP is equivalent to approaching £200
million per annum (approaching 0.2% of national GDP), with this also representing just
over £400 million in output per annum.
53
Percentage of total indirect and induced employment
22 ECOTEC
Cashmere Industry in Scotland
• As a significant employer in the Scottish economy, the cashmere industry is also
contributing in the region of £80 million per annum in terms of real disposable income
available to residents.
• In addition to its direct contribution, importantly, the cashmere industry also supports
jobs and output across a range of other sectors - including retail/wholesale and tourism-
related sectors, together with other textiles sub-sub sectors - through supply chain
linkages and employee expenditure effects.
23 ECOTEC
Cashmere Industry in Scotland
4.0 Scottish Cashmere: Industry Prospects
4.1 Introduction
Having previously provided estimates for the contribution of cashmere to Scotland's
economy, in this section we go on to focus more fully on future prospects for the Scottish
cashmere industry, including analysis of emerging market trends and prospective industry
developments. With these issues in mind we also consider further a number of key factors
most likely to underpin on-going competitive success and future sustainability of cashmere
in Scotland. Importantly, much of the analysis and discussion contained in this section is
rooted in or has otherwise been closely informed by the programme of consultations held
with individual businesses and other industry stakeholders in Scotland. Where
appropriate, we highlight specific business examples to further illustrate key points.
4.2 Future Global Outlook
4.2.1 Cashmere: a growing market
Viewed at a global level the market for cashmere products continues to grow strongly.
World-wide sales of cashmere products are already estimated to be worth $760 - $1050
million annually54 and with the global market for luxury goods expanding rapidly – largely a
function of increasing consumer affluence – future market prospects for the cashmere
industry overall would appear relatively healthy.
Whilst it will remain the case that established, mature international markets for cashmere –
most notably the USA55 - will continue to account for the majority share of sales for at least
the foreseeable future, increasingly, a number of other key geographical markets will
rapidly emerge. Probably the single most important future growth market for cashmere
during the next decade will be Russia.
Increasing product diversity and complexity is also evident in cashmere product markets.
Whilst demand for 'classic' cashmere products remains strong, at the same time there is
also an apparent expanding requirement for fashion-led cashmere. Similarly, there are
strong indications that consumer demand for cashmere is further diversifying: for example,
54
Figures quoted by ERINA
55
Consultations with Scottish producers consistently highlighted the continuing importance of the American market.
According to one consultee the US market accounted for £6.9m pieces in 2001; by 2005 this had increased to £15.6m
pieces.
24 ECOTEC
Cashmere Industry in Scotland
opportunities are opening up in the interiors and furnishings sector,56 whilst there is also an
increased demand for the production of cashmere accessories.
4.2.2 Cashmere: a competitiveness challenge
The continuing growth of low cost knitwear products from Chinese manufacturers and
other producers based in the developing world will play a dominant role in shaping the
future of the cashmere industry. China's capacity for high volume production combined
with low labour costs is enabling appreciably cheaper cashmere products to be produced
and sold to a global market57. Subsequently, cheap, highly commoditised cashmere
products are increasingly evident in high street shops (such as Marks & Spencer's), and
even UK supermarkets such as Tesco58. Clearly, there is obvious concern that producer
nations with much higher labour costs will simply be unable to compete effectively with
cashmere producers in developing countries, with the consequence that current
manufacturing operations will increasingly become out-sourced to lower cost economies.
Moreover, and given the heavy reliance on China as a source of raw cashmere fibre,
perhaps understandably there is some mounting concern among Scottish producers
surrounding potential future access to a ready source of affordable, high quality cashmere
fibre. Good quality raw cashmere fibre is in limited supply and it is likely that both quality
and availability will continue to vary from year to year. As a consequence, high demand
can lead to volatile raw material prices (amplified during recent years by the appreciation
of the Chinese RMB59) and this may prove difficult for producers to pass on to customers.
Recognising that they are unable to compete directly with competition from China, long-
standing producers of cashmere are increasingly moving towards higher value, niche
markets and lower volume production. Whilst arguably there is some concern that the
preponderance of cheaper knitwear products could serve to dilute cashmere's traditional
aspirational and luxury product associations, certainly it is the case that many in the
industry remain confident that there will remain strong demand for higher quality cashmere
('among certain customers, the price of [a product] will not be the primary issue… they will
pay what it takes to get the right product).
56
The market for cashmere in the interiors and furnishings sector is particularly evident in the USA.
57
Discussions with Todd & Duncan suggest that the competition the company faces from low cost locations is both
direct, from Chinese spinners, and indirect, from the growth of Chinese knitters taking market share from European
customers.
58
Cashmere sweaters are now being sold through UK high street retailers for as little as £30. Given this retail price
established cashmere producers based in Scotland are plainly unable to compete on a simple price basis. Ballantyne
Cashmere, for example, indicates that on average each of their garments contains at least £20 worth of cashmere yarn
alone.
59
Cashmere raw material prices increased by approximately 7% during 2006, with this following an increase of
approximately 11% during 2005
25 ECOTEC
Cashmere Industry in Scotland
Similarly, there is also a discernable and growing tendency for customers at the higher end
of the market to move away from classic products in search of more unique and bespoke
offerings. Increasingly, Scottish cashmere businesses recognise that if they are to
effectively respond to changing consumer demands and to differentiate themselves in the
market, then they will need to focus their efforts on the following key areas: design;
flexibility; quality of service; and branding. Perhaps predictably, many business consultees
cited the example of certain Italian companies, a significant number of which are already
operating effectively in niche, high quality markets driven by fashion orientated products.
Whilst China has obvious cost advantages over many developed countries (including
Scotland), its design focus is currently very limited and therefore, at the present time, is
largely responsible for producing commoditised 'classic' cashmere products.
The future of Scottish cashmere, therefore, is likely to lie in exclusive, luxury niche
markets, catering for discerning, quality-conscious consumers at the very high-end income
level. This market segment is regarded as a growing market, which potentially bodes well
for a competitively positioned Scottish cashmere industry.
4.3 Securing a Sustainable Industry
In light of the above discussion of market trends and competitiveness pressures facing the
cashmere industry, it is possible to identify a number of key factors which it may be
anticipated will be central to the securing a sustainable economic future for the cashmere
industry in Scotland:
• Brand development
• Design focus
• High quality, niche markets
• Skills and workforce
• Industry leadership
4.3.1 Brand development
In ensuring that Scottish cashmere is successfully positioned within the global market, it
will be contingent on producers to clearly differentiate themselves and their products
ranges. To this end, the current Scottish Textiles Industry Strategy60 highlights that the
development of strong brands is a key mechanism for achieving a sustainable future for
60
Scotland at the Cutting Edge – A Strategy for the Textiles Industry in Scotland, 2007 – 2010, (2007), Scottish
Enterprise
26 ECOTEC
Cashmere Industry in Scotland
the industry. Positively, this approach is widely recognised and welcomed by a majority of
Scottish cashmere businesses.
As part of long-standing commercial relationships, it is notable that many Scottish
cashmere producers have relied heavily on supplying products to international couture
brands rather than selling products directly under their own labels: in other words, adopting
'private labels' has been a key revenue component of the industry. However, arguably a
more commercially sustainable approach in the longer term, and one centred on clear
product differentiation, requires a refocusing and further development of own label brands
over supply to 'private labels'. Certainly, this is a strategy increasingly espoused by a
number of major companies in the industry. Alex Begg and Co., for example, claim they
now have a clear market focus directed at 'building a brand' and 'increasing brand
penetration'. Two years ago, 88% of Begg's products were sold under another label (such
as Louis Vuitton etc.); this has now fallen to 80%, with the company looking to continue
reducing its reliance on private labels in an attempt to reduce what it regards as 'market
vulnerability'. Peter Scott and Co Ltd (see box below) also has a major branding campaign
underway.
Brand development - Peter Scott and Co Ltd
Peter Scott and Co Ltd. is a long established knitwear company based in Hawick. The
company is currently working to further developing its brand as a 'leading player in the
golf-wear market' – a process recently abetted through the securing of a sponsorship
agreement with Colin Montgomerie, Scotland's leading international golfer. According to
representatives of the company many of the world's top golfers actually already wear
products manufactured by Peter Scott, though the company's branding is not readily
apparent ('…we remain one of Scotland's best kept secrets: it's time to reveal this secret
to the golfing world'). The company has a stated aim to grow its market share of the
luxury cashmere sector in Europe, America and Japan by promoting its products using
the Peter Scott and Co Ltd logo as a brand in its own right.
Source: Business consultations and www.peterscott.co.uk
Other Scottish-based businesses, including Lochcarron of Scotland and Lochcarron
Knitwear (see box below) are seeking to strengthen their brand image through the
mechanism of opening independent stores.
27 ECOTEC
Cashmere Industry in Scotland
Independent stores – Lochcarron Knitwear
Lochcarron Knitwear, based in Hawick, produces a range of knitwear products, around
52% of which are made from cashmere. In order to maintain a competitive edge,
Lochcarron Knitwear is committed to moving further towards niche markets and
independent stores. The company is currently under-going a major re-branding process
which has included new photo shoots and a new website. Perhaps more fundamentally,
in August 2007 Lochcarron opened their first independently branded shop (based in
Selkirk). According to the company considerable effort has been invested in ensuring
that the design and visual qualities of the shop sufficiently reflected the 'correct brand
image' of Lochcarron. Lochcarron Knitwear has commercial plans to open further retail
stores on an international basis.
Source: Business consultations
Beyond branding activity conducted at the individual business level, there is increasing
recognition of the opportunity surrounding efforts to market and promote Scottish
cashmere as a distinctive entity for the benefit of the wider body of domestic producers.
Globally, the Scottish cashmere industry already has a well-established recognition for its
high quality products and there is significant demand from abroad for the 'Scottish' brand.
The 'Cashmere Made in Scotland' promotion was first established in 199761, with a specific
remit intended to focus on the 'competitive aspects of Scottish textiles – design, innovation
and value added – to sustain and increase the business of cashmere made in Scotland'62.
Subsequently, the initiative has underscored a range of promotional activity in a number of
key market areas - notably Korea, Japan, USA, Italy, and Russia – with these events
reported as having had varying levels of success63. Importantly, the initiative is also
synonymous with the 'Cashmere Made in Scotland' label, which can be used by members
of the Cashmere Club to 'indicate and guarantee the quality of the product to both the
retailer and the consumer'. Generally, Scottish businesses – including both members and
non-members of the Cashmere Club - indicated positive support for this type of branding
activity ('a very effective selling point'; 'an important mechanism to promote high quality
cashmere'), though, perhaps inevitably, many were also of the view that more could be
done to market the label more effectively64 ('it does not carry a high enough profile', and
'the standards of quality do exist; they need to be promoted so that they are transparent to
61
Evaluation of Cashmere Made in Scotland Promotion, 2001 – 2003, (2003), Scottish Enterprise Borders
62
Cashmere Made in Scotland 2002 – 2005 Evaluation; (2007), Scottish Enterprise Borders
63
ibid
64
It was indicated that the label was not marketed sufficiently at fashion shows, such as London Fashion Week.
28 ECOTEC
Cashmere Industry in Scotland
the consumer'). Specifically, there would appear to be some lack of clarity among
businesses in terms of defining the level of quality associated with the label65. Others felt
that there existed scope to broaden the range of businesses making use of the label66.
Viewed more generally, there could perhaps exist scope for further marketing Scottish
cashmere as part of a wider campaign to collectively promote Scottish luxury products
(whisky, foods etc.) and experiences (tourist destinations, golf etc.), with an emphasis on
opportunities for cross-selling within this distinct luxury and quality Scotland portfolio.
4.3.2 High quality, niche markets
Given the increasing level of competition facing Scottish cashmere businesses,
consultations revealed widespread recognition of the need to develop and focus on growth
niche markets in order to secure future profitability: in the words of industry consultees
'…addressing a niche market is the only way to survive for Scottish manufacturers and
designers'; and 'companies within the cashmere industry can only survive if they adopt a
strategy [centred around] specialisation').
With a relatively high manufacturing cost base Scottish producers will need to ensure that
they can command a significant price premium for their quality products, and it was
broadly the case that all businesses interviewed to a considerable extent identified the
higher-end quality market as the single most important niche area for their future
operations – an essential prerequisite to further cementing Scotland's acknowledged
strengths of quality and to differentiate Scottish cashmere products from commoditised
mass production. As a high quality fabric, the success of cashmere more generally is
viewed by many as being critical to the survival of the wider knitwear industry in Scotland.
The example of Lochcarron of Scotland is perhaps illustrative of a wider move among
some Scottish producers towards higher quality market offerings, including an increased
emphasis on cashmere.
There are several examples of Scottish companies having adopting a focus on highly
specialised and/ or emerging niche markets. For example, R and J Keddie has diversified
into baby garments; Peter Scott and Co Ltd has targeted golf-wear; Lochcarron of
Scotland has seen an increased demand for cashmere accessories and soft furnishings;
and Eribe Knitwear Design (see box below) is exploring the potential of new ways of
working with cashmere.
65
A number of businesses reported that the level of quality apparent in products displaying the label varied considerably.
66
Several smaller businesses (including designers) that are not members of the Cashmere Club felt that they could
positively benefit from the label. They held view that if the range of businesses using the label was broadened then its
marketing power could be strengthened.
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Cashmere Industry in Scotland
Niche markets – Eribe Knitwear Design
Eribe Knitwear Design, based in Galashiels, is a small business (5 employees) which
designs, manufactures and exports knitwear. Established in 1986 with a focus on
cashmere products, partly on account of a decline in the Japanese market Eribe
Knitwear Design has increasingly diversified into a range of other, more highly
specialised products markets. In recognition of the need to better harness prospects in
niche and exclusive markets, Eribe, has in the words of the company, 'worked against
the tide to produce completely different products from traditional Scottish knitwear'. For
example, the company have recently started to produce hand painted cashmere and are
also exploring the potential of un-dyed natural cashmere.
Source: Business consultations and www.eribe.co.uk
4.3.3 Design and flexibility
An important finding from the consultations was widespread recognition among those in
the industry for a need to better enhance the design element of their operations ('new
designs and colour sells products'; 'design element needs to improve'). The traditional
image of cashmere has evolved, with design skills now central to the development of
ranges of new contemporary designs and unique products: ones that are truly responsive
to changing customer requirements. Notably, and notwithstanding enduring levels of
demand for 'traditional' Scottish cashmere products, there is a growing requirement for the
industry to become more fashion-led. Lochcarron Knitwear, for example, has consciously
moved towards stronger design-led production – the company now has six designers
based at their Selkirk site to work with customers and adopt an increasing emphasis on
high fashion and provision of bespoke offerings.
It can be hoped that Scottish companies will benefit from increasing expertise in
production of design-led novelty cashmere collections. Alongside the design element,
flexible production approaches are widely perceived as being crucial to future operations,
with businesses required to be able to respond quickly and flexibly to changing consumer
demands and shorter lead times. Within the industry there is some evidence to suggest
adoption of more obviously flexible production models amongst certain companies,
including the example of Scott and Charters Ltd (see box below).
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Cashmere Industry in Scotland
Flexible production – Scott and Charters Ltd
Scott and Charters Ltd is a small business operating from a site in Hawick with a team of
26 multi-skilled individuals. According to the company, the business has moved away
from bulk manufacturing and now manufactures to specific customer requirements.
Given the small size of the company they have been able to adopt very flexible working
practices and now produce specialised goods at a much lower volume. As a small
business, Scott and Charters view is that they possess 'greater flexibility and can control
capacity far more effectively'
Source: Business consultations
4.3.4 Skills and workforce
The availability of an appropriately skilled workforce will be an essential requirement to the
securing of a sustainable economic future for Scottish cashmere. On the basis of industry
consultations a number of factors have contributed to the present workforce issues
affecting the industry:
• The textiles industry in general is characterised by an ageing workforce, with the
cashmere industry being no exception.
• The fact that the textiles sector in Scotland has experienced decline in recent years is
cited as a reason for a poor industry image amongst young people: the perception is of
an industry with 'limited future prospects'.
• The contraction of the industry has also led to a lack of higher education provision
specific to the industry.
• Generational differences mean that a high number of young people are now continuing
with higher education rather than entering local employment.
The fact that a high proportion of current industry employees are approaching retirement
age is an obvious cause for concern amongst many businesses. The issue is apparently
accentuated on account that many of the jobs in the cashmere industry require very
specific skills, with the loss of highly specialised technical skills comprising a particular
concern. For example, the hand made element of products assembled by Ballantyne
Cashmere is regarded as extremely important, with the experience and skill of individual
members of the workforce seen as crucial (see box below). Similarly, many smaller
businesses, such as Scott and Charters Ltd., rely heavily on multi-skilled personnel which
it can be assumed will not be easy to replace. As a result of this shrinking pool of labour,
several businesses have alluded an element of poaching exists between businesses in
respect of obtaining skilled workers.
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Cashmere Industry in Scotland
Workforce Issues – Ballantyne Cashmere
Ballantyne Cashmere was founded in 1921. It is now an Italian owned company but
maintains a Scottish production plant in Innerleithen which continues to be responsible
for the majority of Ballantyne's production. According to the company, the hand made
element of Ballantyne products is extremely important, with this set to remain so in the
future. Given the ageing workforce within the cashmere industry, there is concern over
the continuity of skilled labour as people retire – 'it takes nearly two years to learn the
hand loom technique, but true specialisation comes only after at least three years of
experience'. Generational differences, including the increasing trend for more young
people to go to university, act to further compound this issue.
Source: Business consultations and www.ballantyne.it/
More positively, a number of companies made reference to the opportunities for cashmere
businesses to benefit from the courses available through the Herriot Watt College,
particularly given its favourable geographical location within the Borders. Many
businesses also recognised the increasing potential offered by migrant workers, for
example those from Eastern Europe, in terms of skills and workforce development.
4.3.5 Leadership
The formation of the Cashmere Club should rightly be seen as a response from those in
the industry of a pressing need for Scottish producers and businesses to work together in
the form of a single industry body directed at promoting and championing Scottish
cashmere. Within the context of the current competitiveness climate facing the industry,
the Cashmere Club's original objectives continue to remain highly valid:67
• To increase the awareness of Scottish Cashmere products, at trade and consumer
level.
• To differentiate Scottish Cashmere from its competitors.
• To increase the sales of Scottish Cashmere and therefore improve the competitiveness
and profitability of Scottish Cashmere businesses.
• To provide targeted international market research to boost the Scottish Cashmere
industry’s business performance internationally.
• To encourage the industry to work collectively in promoting and supporting the industry
as a whole.
67
The Scottish Cashmere Club, Memorandum and Articles of Association, (2002)
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Cashmere Industry in Scotland
• To develop a quality mark/symbol that will be used by all member companies in a range
of marketing and labelling materials (swing tickets, brochures, etc).
• To identify appropriate promotional and marketing activity within key markets to promote
the quality mark, the industry and the products (e.g. advertising and promotional
features, store promotions, etc).
• To continually monitor and evaluate the result of the activity, primarily measuring the
increase in sales of cashmere products, but also to identify the other “qualitative”
activities such as increased awareness of Scottish cashmere, use of the symbol by
customers, etc.
Whilst it is apparent that the Cashmere Club represents most of the principal Scottish
cashmere producers, it is notable that many designers as well as other, smaller cashmere
businesses are not so clearly represented at the current time. Nevertheless, it should be
encouraging to report that the Cashmere Club is widely viewed as an effective mechanism
for articulating and acting on common issues confronting the industry ('it has acted as an
effective shop window for the industry'; '[the Club] provides an opportunity for competitors
to sit next to each other and work together for Scottish industry interests…it provides a
definite voice'). Notably, the promotional work undertaken by the Cashmere Club in Korea
(2002) and Japan (various events from 2002 to 2004) was viewed by many of those
businesses involved as having being particularly useful from a marketing standpoint.
In summary, the consultations tended to further highlight the considerable potential that
exists for cashmere businesses to work together effectively towards common interests and
collective industry goals. It is reasonable to assume that the future prosperity of the
industry in Scotland will be dependent to a significant degree on the continuing role of an
appropriate industry body in providing the required level of leadership and strategic
direction demanded in an increasingly competitive global marketplace.
4.4 Strategic Conclusions: industry prospects
Our strategic conclusions in relation to cashmere industry prospects are as follows:
• The global market for cashmere continues to grow strongly. Whilst established markets
can be expected to continue to account for the larger share of sales, increasingly, a
number of major new geographical markets – including Russia - will further emerge.
• The continuing growth of low cost knitwear products from China and other developing
world producers will exert a dominant force in shaping future market demand for
cashmere.
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Cashmere Industry in Scotland
• Reflecting these global industry pressures, and in recognition that they are unable to
compete directly on the basis of price, the industry in Scotland is necessarily
increasingly moving towards higher value, exclusive niche markets and specialised
production.
• Central to securing a sustainable economic future for Scottish cashmere be
requirements for effective brand development and management; adopting a focus on
design creativity and flair; an emphasis on high quality, niche products; appropriate
workforce skills development; and strong strategic industry leadership.
• It will be contingent on producers to clearly differentiate Scottish cashmere product and
further develop strong brand image as a key mechanism for competitive return. Further,
and encouragingly, there is increasing recognition amongst Scottish producers of the
opportunities afforded through dedicated marketing and promotion of Scottish cashmere
as a distinctive 'national product', to the collective benefit of all in the indigenous
industry.
• A clear focus on high value, quality product will be essential if Scottish cashmere is to
successfully command a significant price premium in the global marketplace and is to
further differentiate Scottish quality products from commoditised mass produced
garment ranges.
• Scottish cashmere businesses also possess a strong awareness of the need to further
enhance the design element of their operations. As the industry becomes more
fashion-led, flexible manufacturing approaches incorporating custom design that can
respond quickly to changing consumer demands will be important in the development of
new contemporary designs and one-off product lines.
• The industry requires access to an appropriately skilled workforce, yet it is characterised
by a shrinking pool of locally available labour. As a short term response to this issue,
businesses are seeking to maximise the opportunities afforded by migrant workers.
Looking forward, it might be hoped that an improved industry image combined with an
increasing emphasis on higher value (and hence, higher pay) jobs will contribute to a
more closely attuned supply of skilled labour.
• As an industry body the Cashmere Club is generally viewed as both a desirable and
effective mechanism for articulating and acting on common issues confronting the
industry – a position which is underscored in light of the competitiveness climate facing
the industry. It can be anticipated that the continued success of the industry in Scotland
34 ECOTEC
Cashmere Industry in Scotland
will be dependent to substantial degree on the future role of the Cashmere Club in
providing the required level of industry leadership and strategic direction.
35 ECOTEC
Cashmere Industry in Scotland
5.0 Conclusions and Strategic Findings
In this final section of the report we bring together our key findings from the study and
further highlight the particular contribution that the cashmere industry makes to Scotland's
economy.
5.1 Scottish Cashmere: Industry Profile and Trends
The following table summaries key components of Scottish cashmere industry profile:
Profile Scottish cashmere industry
Business base There are 40+ companies fully or partially operating within the cashmere industry
The vast majority of cashmere businesses remain Scottish-owned
The majority of businesses may be classified as knitters (and weavers)
Although the majority of businesses are micro businesses (<10 employees), an
above average number comprise medium or large companies
The majority of companies in the industry are long-established businesses, with
more than one-half claiming to have been operating for 25+ years
Employment base As an analysis start point, and on the basis of (limited) official data, it may be
estimated that perhaps 3,500 – 4,000 employees are directly employed within the
cashmere industry
The majority of employees (3 in 4) are engaged in manufacturing production,
followed by general office and design / product development
Latest survey findings provide some evidence that employment levels may be
stabilising at the current time, with 8 out of 10 companies reporting employment
having either increased or else remained static over the previous 12 months
Geographical Cashmere businesses are notably concentrated in the Scottish Borders sub-region,
composition particularly in and around Hawick.
Survey results suggest that perhaps almost one-half of all direct employment is
located in the Borders
Glasgow and Edinburgh are a focus for particular industry functions, notably retail
and design
Performance 3 in 4 cashmere businesses indicated that their turnover has increased or else
remained static over the previous 12 months
Encouragingly, a similar proportion expect turnover to increase over the next 12
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Cashmere Industry in Scotland
months
Compared to the textiles industry as a whole, productivity has reportedly increased
in a greater proportion of cashmere businesses
A majority of cashmere businesses claim to operate under a vertically integrated
structure
Markets Approaching 2 in 3 cashmere companies claim to operate internationally, selling
products and/ or services in export markets
The USA comprises the single largest export market for Scottish producers,
followed by Italy, France and Japan
Analysis of emerging industry trends suggest that significant future market
opportunities are likely to continue to develop for a flexible, innovative and dynamic
cashmere industry which is focussed on high quality, niche markets
• It should be sufficiently clear that the industry has undergone substantial structural
change and economic adjustment during recent years. Specifically, and in response to
increasing global competition, there have been moves towards out-sourcing production,
an increasing emphasis on quality, and a move towards more specialised markets.
• However, and notwithstanding the fact that cashmere industry has experienced a
significant recent employment decline, latest evidence would tend to indicate a stronger
basis for optimism existing within the industry at the current time. Moreover, it can be
anticipated that there are likely to be significant future market opportunities for a flexible,
innovative and dynamic cashmere industry which is focused on high quality, niche
markets.
5.2 Scottish Cashmere: Economic Impact Contribution
• Our impact analysis reveals that the cashmere industry comprises a notably significant
employer and income contributor to the wider Scottish economy.
• The direct employment contribution of Scotland's cashmere industry is estimated at
approximately 4,000 jobs.
• Beyond this direct contribution, and including indirect and induced employment effects,
the total employment impact of cashmere to Scotland is estimated at in excess of 5,500
jobs.
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Cashmere Industry in Scotland
• Cashmere's total income contribution to Scotland's GDP (direct/ indirect/ induced) is
equivalent to approaching £200 million per annum (approaching 0.2% of national GDP),
with this also representing just over £400 million in output per annum.
• As a significant employer in the Scottish economy, the cashmere industry is also
contributing in the region of £80 million per annum in terms of real disposable income
available to residents.
• In addition to its direct contribution, importantly, the cashmere industry also supports
jobs and output across a range of other sectors - including retail/wholesale and tourism-
related sectors, together with other textiles sub-sub sectors - through supply chain
linkages and employee expenditure effects.
5.3 Scottish Cashmere: Industry Prospects
• The global market for cashmere continues to grow strongly. Whilst established markets
can be expected to continue to account for the larger share of sales, increasingly, a
number of major new geographical markets – including Russia - will further emerge.
• The further growth of low cost, commoditised knitwear products from China and other
developing world producers will continue to operate as a dominant force in shaping
future global market demand for cashmere.
• Reflecting these global industry pressures, and in recognition that they are unable to
compete directly on the basis of price, the industry in Scotland is necessarily
increasingly moving towards higher value, exclusive niche markets and specialised
production.
• Central to securing a sustainable economic future for Scottish cashmere be
requirements for effective brand development and management; adopting a focus on
design creativity and flair; an emphasis on high quality, niche products; appropriate
workforce skills development; and strong strategic industry leadership.
• It will be contingent on producers to clearly differentiate Scottish cashmere product and
to further develop strong brand image as a basis for competitive advantage. Further,
and positively, there is increasing recognition among producers of the opportunities
afforded through dedicated marketing and promotion of Scottish cashmere as a
distinctive 'national product', to the collective benefit of all in the indigenous industry.
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Cashmere Industry in Scotland
• A clear focus on high value, quality product will be essential if Scottish cashmere is to
successfully command a significant price premium in the global marketplace and is to
further differentiate Scottish quality products from commoditised mass produced
garment ranges.
• Those operating in the industry are also acutely aware of a need to further enhance the
design element of producer business operations. As the industry becomes more
fashion-led, flexible manufacturing approaches incorporating custom design that can
respond quickly to changing consumer demands will be important in the development of
new contemporary designs and one-off product lines.
• The industry requires access to an appropriately skilled workforce, yet it is characterised
by a shrinking pool of locally available labour. Short term, businesses are seeking to
exploit opportunities afforded by migrant workers. Longer term, it might be hoped that
an improved industry image combined with an increasing emphasis on higher value jobs
will contribute to a more closely attuned supply of skilled labour.
• With few exceptions, the Cashmere Club is perceived as both a desirable and effective
mechanism for articulating and acting on common issues confronting the industry. It
may be expected that the continued success of the industry in Scotland will be
dependent to substantial degree on the future role of the Cashmere Club in providing
the required level of industry leadership and strategic direction.
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Cashmere Industry in Scotland
Annex One: Consultees
A1
Strategic Consultees
Individual Position Organisation
Kirsty Scott Head of the Scottish Textiles Scottish Enterprise
Team
Alistair McKinnon Director of Enterprise Scottish Enterprise Borders
Development
Bryan McGrath Head of Economic Development Scottish Borders Council
and Regeneration
James McArdle Chair Cashmere Club
Business Consultees
Individual Position Organisation
David Breckenridge Managing Director Alex Begg and Co.
Tom Harkness and Derek Forest Chief Operating Officer and Chief Ballantyne Cashmere Company
Finance Officer
Jim Carrie Managing Director Barrie Knitwear
Lisa Cameron Taylor Managing Director Cameron Taylor
Andy Bartmess Chief Operating Officer Dawson International Plc
Rosy Eribe Owner/Managing Director ERIBE Knitwear and Design
Melissa Strong Managing Director Hillary Rohde
Lindsay Taylor Director Holland and Sherry Ltd
James Sugden Group Managing Director Johnstons of Elgin
A2
Individual Position Organisation
Danny Miller Managing Director Lochcarron Knitwear
David Ogilvie Managing Director Lochcarron of Scotland
Raymond Keddie Director Personal Cashmere, R&J Keddie
Nick Bannerman Managing Director Peter Scott and Co. Ltd
Doreen Keen Managing Director Queene and Belle
Robert Charters Managing Director Scott and Charters (Hawick) Ltd
Arthur Rennie Managing Director Simply Cashmere
James McArdle Managing Director Todd and Duncan
James R Hinchliffe Director Z Hinchliffe and Son
A3
Annex Two: Topic Guides
A4
Cashmere Business Consultations – Topic Guide
The Scottish Textiles Industry Survey was undertaken concurrently with the Cashmere
Study, with a set of generic 'textiles industry' questions preceding those specific to the
cashmere industry (detailed below). The information that was obtained from the cashmere
businesses in respect of the Textiles Survey was primarily used to inform the Scottish
Textiles Industry Survey but was also used to enhance this study.
Business Information, specific to cashmere
1 Where do you source your cashmere from? Why?
Within Scotland, imported (identify countries) – if necessary define proportions.
Identify reasons, e.g. cheaper, higher quality
2 What type of occupations are in your company?
Proportions of managers, skilled trades, sales, elementary etc
3 What proportion of your final products is cashmere?
If less than 100%, estimate proportion of turnover reliant on cashmere
Industry Profile
Confirm secondary data patterns/trends
4 Are there any geographical clusters of cashmere businesses in Scotland?
e.g. Scottish Borders, larger cities. Explore whether types of businesses cluster.
5 What type of businesses dominate the cashmere industry in Scotland?
e.g. small/large businesses, designers, manufacturers
6 Who are the biggest players in the cashmere industry in Scotland?
7 What/who are Scotland's predominant markets?
Geographically - UK, Europe, America etc
Product - retailers, knitters, manufacturers etc percentage share by product type
A5
8 Who do you see as your (individual business) main competitors?
Large/small companies, European companies, key companies in Scotland etc
9 Who do you see as Scotland's main competitors?
Are they new/emerging competitors?
Economic Contribution and Impact
10 How do you feel that sales of cashmere products have changed over the last 10
years?
Increased/decreased/remained fairly static. Explore changes in sales within their own
company, Scotland, UK and globally. Identify key growth products and changing
geography of market areas and production areas.
11 In your view, to what extent does cashmere contribute to the Scottish economy?
Very significant/fairly significant/small significance. Explore reasons.
12 Are there any wider contributions of the cashmere industry that are less easy to
quantify?
e.g. marketing Scotland
13 What role does cashmere play in terms of enhancing the 'brand image' of Scotland?
Explore effectiveness of this role, e.g. the 'Cashmere Made in Scotland' label, other
approaches, how it could be improved.
Forward-looking
14 What do you see as the key trends for the Scottish Cashmere industry over the next
10 years?
Growth/decline/remain fairly constant, diversification, increase/decrease in number of
companies etc
15 What do you see as the future opportunities for cashmere businesses in Scotland?
e.g. Exploiting new markets, increasing cashmere production
16 What do you see as the future risks/threats for cashmere businesses?
A6
e.g. increasing competition, declining demand
17 What are the future plans for your company?
Plans to expand, diversify etc?
Business Support
18 Do you feel that the cashmere industry is given the appropriate level of strategic
recognition?
Explore reasons
19 How well do you feel that the industry is represented by the private sector? How
effective are they?
e.g. The Cashmere Club
A7
Cashmere Strategic Consultations – Topic Guide
Industry Profile
Confirm secondary data patterns/trends
1 Are there any geographical clusters of cashmere businesses in Scotland?
e.g. Scottish Borders, larger cities. Explore whether types of businesses cluster.
2 What type of businesses dominate the cashmere industry in Scotland?
e.g. small/large businesses, designers, manufacturers
3 In general, what is the occupational structure within the Cashmere industry?
Proportion of higher value added jobs, proportion of designers/manufacturers. Average
wage levels.
4 Roughly, what proportion of cashmere companies in Scotland are Scottish owned?
5 Roughly, what proportion of inputs is sourced from within Scotland?
6 Who are the biggest players in the cashmere industry in Scotland?
7 What/who are Scotland's predominant geographical and product markets?
Geographically - UK, Europe, America etc
Product - retailers, knitters, manufacturers etc percentage share by product type
8 Who do you see as Scotland's main competitors?
Large/small companies, European companies, key companies in Scotland etc
Are there any new/emerging competitors?
Economic Contribution and Impact
9 How do you feel that sales of cashmere products have changed over the last 10
years?
A8
Increased/decreased/remained fairly static. Explore changes in sales within Scotland, UK
and globally. Identify key growth products and changing geography of market areas and
product areas.
10 In your view, to what extent does cashmere contribute to Scottish textiles and the
Scottish economy as a whole?
Very significant/fairly significant/small significance. To what extent does the Cashmere
industry link into the wider economy? Explore reasons.
11 Are there any wider contributions of the cashmere industry that are less easy to
quantify?
e.g. marketing Scotland
12 What role does cashmere play in terms of enhancing the 'brand image' of Scotland?
Explore effectiveness of this role, e.g. the 'Cashmere Made in Scotland' label. Any other
approaches?
Strategic Perspective
13 Do you feel that the cashmere industry is given the appropriate level of strategic
recognition?
14 What types of strategic interventions have been adopted?
15 What support is available to businesses in the cashmere industry? Is this
sufficient?
Forward-looking
16 What do you see as the key trends for the Scottish Cashmere industry over the next
10 years?
Growth/decline/remain fairly constant, diversification, increase/decrease in number of
companies etc
17 What do you see as the future opportunities for cashmere businesses in Scotland?
e.g. Exploiting new markets, increasing cashmere production
18 What do you see as the future risks/threats for cashmere businesses?
A9
e.g. increasing competition, declining demand
19 What do you see as the future role of the cashmere industry in the Scottish
economy?
A10
Textiles Industry Survey 2007
Company name …………………………………………………………
Location …………………………………………………………………
Respondent name …………………………………………………………
Position …………………………………………………………………
Telephone ………………………........ Email ………………………………………
Q1a. Within which Scottish local authority areas do you have business locations?
(Interviewer please write in from code list provided)
Q1b. Which location is your core site?
Q1c. At which location are you based?
Q2a. Is your company a Knitwear, Weaving, Apparel or Technical Textiles company? (code all that
apply)
Knitwear 1
Weaving 2
Apparel 3
Technical Textiles 4
Q2b. For how long has your Scottish operation been established?
Up to 18 months 1 11 to 25 years 5
18 months to 3 years 2 26 or more years 6
A11
4 to 5 years 3 Don't know 7
6 to 10 years 4
Q3. How is your company owned and operated (by operate we mean either buy, sell or
manufacture)? READ OUT & code one only
Scottish owned and only operate in Scotland 1 – go to Q7
Scottish owned and operate throughout the UK or 2 – go to Q4
internationally
Not Scottish owned and operate only in Scotland 3 – go to Q6
Not Scottish owned and operate throughout the UK or 3 – go to Q4
internationally
Don't know 4 – go to Q7
Refused 5 – go to Q7
Q4. Which of these does your company do? READ OUT (Code all that apply)
Sell products or services in the UK 1 – ask 5a
Sell products or services internationally 2 – ask 5b & 5c
Buy products or services in the UK 3 – ask 5d
Buy products or services internationally 4 – ask 5e
Outsource manufacturing or processing internationally 5 – ask 5f & 5g
Manufacture in Scotland 6 – ask 6
Please follow routings at Q4 carefully and ask all relevant parts of Q5. E.g. If at Q4 codes 1, 3
& 4 please ask Q5a, Q5d, Q5e.
Q5.
Q5a What percentage of total sales are in the UK? %
Q5b What percentage of total sales are international? %
Q5c Where do you sell products outside the UK?
(Please probe fully and write in top 3 countries)
Q5d What percentage of total purchases are in the UK? %
Q5e What percentage of total purchases are %
international?
Q5f What percentage of your manufacturing/processing %
A12
cost base is outsourced internationally?
Q5g Where do you outsource this work?
(Please probe fully and write in top 3 countries)
Q6. How would you describe the level of decision making within your Scottish operation? (e.g
what proportion of business decisions are made in Scotland)
None 1 All 4
Some 2 Don't know 5
Most 3
Q7a. Which of the following functions is your business involved in?
(Please READ OUT and code all that apply)
Q7b. And, what proportion of your business is in each of these?
(Please probe for percentage breakdown – NB should add up to 100%)
Q7a Q7b
(code all that %
apply) Breakdown
Manufacturing 1
Design 2
Wholesale 3
Retail 4
Q8a. Which of the following textile sectors are you involved in?
(Please READ OUT and code all that apply)
Q8b. And, can you tell me what proportion your business is in each of those mentioned? (Please
probe for percentage breakdown – NB should add up to 100%)
Q8a Q8b
(code all %
that Breakdown
apply)
Interiors/homeware 1
Fashion 2
Technical Textiles 3
Other textile sector 4
A13
Interviewer – please ask Q9a, 9b, 9c or 9d (one only) based on responses to Q8. Please ask for
the area with the highest percentage breakdown.
Q9a. You mention you are mainly involved with 'interiors/homeware', which of the following areas
apply to your business? READ OUT
Spinning 1 Design 6
Knitting 2 Wholesale 7
Printing 3 Retail 8
Weaving 4 Other 9
Product CMT (cut, make and 5
trim)
Q9b. You mention you are mainly involved with 'fashion', which of the following areas apply to your
business? READ OUT
Garment CMT (cut make and 1 Millinery 6
trim)
Spinning 2 Design 7
Knitting 3 Wholesale 8
Printing 4 Retail 9
Weaving 5 Other 10
Q9c. You mention that you are mainly involved with 'Technical Textiles', which of the following
areas apply to your business? READ OUT
Agrotech – agriculture, aquaculture, horticulture & forestry 1
Buildtech – building and construction 2
Clothtech – technical components of footwear & clothing 3
Geotech – geotextiles & civil engineering 4
Hometech & flooring – technical componenets of furniture, 5
household textiles & floor coverings
Indutech – filtration, conveying, cleaning & other industrial uses 6
Medtech – hygiene & medical 7
Mobiltech – automobiles, shipping, railways & aerospace 8
Eokotech – environmental protection 9
Packtech – packaging 10
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Protech – personal & property protection 11
Sportech – sport & leisure 12
Other 13
Q9d. You mention that you are mainly involved with an 'Other' textile sector, which of the following
areas apply to your business? READ OUT
Design/Maker (under 5 1
employees)
Design consultancy 2
Business consultancy 3
Converters 4
ASK ALL
Q10a. How many employees do you have within your Scottish operation?
Q10b. And how many of these employees are in each of the following areas?
(NB should add up to total a Q10a)
Manufacturing/production
Design/product development
Marketing
General office
Warehousing/logistics
Retail
TOTAL (NB should add up to total at
Q10a)
Q10c. Who is responsible for HR within your company?
HR manager 1
Director or manager with HR responsibilities 2
as an addition to their main role
Other member of staff with HR 3
responsibilities as an addition to their main
role
Q11a. Can you please tell me how many of your employees are in higher value jobs?
A15
(By this we mean employees in managerial and professional occupations and associate
professional and technical occupations)
Q11b. And how many of your employees are migrant workers?
Q12a. Has the number of employees in your Scottish operation increased, decreased or stayed the
same within the last 12 months?
Increased 1 – go to q12b
Remained the same 2 – go to q13a
Decreased 3 – go to q12d
Don't know 4 – go to q13a
Q12b. What percentage would you say it had increased by?
%
Q12c. Why do you believe employment has increased? PLEASE PROBE FULLY
Now please go to Q13
Q12d. What percentage would you say it has decreased by?
%
Q12e. Why do you believe employment has decreased? PLEASE PROBE FULLY
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Q13. Do you expect the number of employees to increase, decrease or stay the same within the
next 12 months?
Increase 1
Remained the same 2
Decrease 3
Don't know 4
Q14a. What is your annual training budget for staff?
£
Q14b. What proportion of your annual training budget is for employees at management and director
level?
%
Q15. As a proportion of total expenditure, has your capital expenditure increased, decreased or
remained the same over the last three years?
Increased 1
Remained the same 2
Decreased 3
Don't know 4
Q15b. PLEASE READ OUT – 'We would now like to move on to talk about your spend on product
development and R & D.' As a proportion of your total expenditure, what is your annual spend on
product design and development?
%
Q16a. As a proportion of total expenditure, what is your annual spend on R&D?
(Please read out definition – "Research and experimental development (R&D) comprise
creative work undertaken on a systematic basis in order to increase the stock of knowledge,
including knowledge of man, society, and the use of this stock of knowledge to devise new
applications")
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%
Q16b. As a proportion of total expenditure, has your expenditure on R&D increased, decreased or
remained the same over the last three years?
Increased 1
Remained the same 2
Decreased 3
Don't know 4
Q17a. Has the development of new products arising from this R&D expenditure increased, decreased
or remained the same?
Increased 1
Remained the same 2
Decreased 3
Don't know 4
Q17b. What proportion of your annual turnover would you attribute to sales of these new products
within the past 3 years?
%
Q18. What was the approximate turnover for your Scottish operation in your last financial year?
£1-£25,000 1 £500,001-£1m 9
£25,001-£50,000 2 £1,000,001-£5m 10
£50,001-£75,000 3 £5,000,001-£10m 11
£75,001-£100,000 4 £10,000,001-£50m 12
£100,001-£150,000 5 £50,000,001-£250m 13
£150,001-£200,000 6 £250m + 14
£200,001-£250,000 7 Don't know 15
£250,001-£500,000 8 Refused 16
Q19a. Would you say your turnover has increased, decreased or stayed the same in the last 12
months?
Increased 1 – go to Q19b
A18
Remained the same 2 – go to Q19c
Decreased 3 – go to Q19c
Don't know 4 – go to Q19c
Q19b. What percentage has it increased by?
%
Q19c. Do you expect your turnover to increase, decrease or remain the same in the next 3 years?
Increase 1 Decrease 3
Remain the same 2 Don't know 4
Q20a. Have your margins increased, decreased or remained the same in the last 12 months?
Please read out – by 'margins' we are referring to 'net profit'
Increased 1 Decreased 3
Remained the same 2 Don't know 4
Q20b. Do you expect your margins to increase, decrease or remain the same in the next 3 years?
Increase 1 Decrease 3
Remain the same 2 Don't know 4
Q21a. Have the levels of productivity increased, decreased or remained the same in the last 12
months? (Please probe from the options below)
Increased 1 – please go to Q21b
Remained the same 2 – please go to Q22a
Decreased 3 – please go to Q21c
Don't know 4 – please go to Q22a
Q21b. Why do you believe productivity has increased? PROBE FULLY
Q21c. Why do you believe productivity has decreased? PROBE FULLY
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Q22a. Have you made use of any Scottish Enterprise or Highlands and Islands business support
services in the last 3 years?
Yes 1 – go to Q22b
No 2 – go to Q23
Q22b. If yes, which services have you used? PROBE FULLY
Q22c. Do you have any comments on the services you have used? PROBE FULLY
Q23. What would you say are the 3 most critical issues affecting your business at this time?
1.
2.
3.
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Annex Three: REMI-ECOTEC Model
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REMI-ECOTEC Model
The REMI-ECOTEC Model is a powerful and highly specified spatial economic model. The Model
has capabilities for undertaking economic forecasting, impact assessment, policy analysis and
simulations, allowing users to answer the “what if” questions about the effects of policies,
interventions and trends in areas such as transport, industrial policy and regional economic
development. In order to fully evaluate the economic contribution of key assets or industries, for
example, policy makers need to understand not only the direct implications of such assets, but also
the often far greater repercussions on the economy.
Model Structure
The REMI-ECOTEC Model is a structural model, meaning that it clearly includes cause-and-effect
relationships. The forecasting and policy analysis system includes key econometric estimates and
inter-industry transactions, long run equilibrium features, as well as new economic geography
elements. It includes: substitution among factors of production in response to changes in relative
factor costs; migration responses to changes in expected income; economic activity rate responses
to changes in wage and employment conditions; wage rate responses to labour market changes;
consumer consumption responses to changes in real disposable income and commodity prices;
and local, regional, and market shares responses to changes in regional production costs and
agglomeration economics.
The figure overleaf provides a summary overview representation of the Model. The Output block
depicts all components of final demand. The Labour & Capital Demand block shows how labour
and capital depend both on output and their relative costs. Population and Labour Supply are
shown as contributing to demand and to wage determination in product and labour markets. The
feedback from this market shows that economic migrants respond to labour market conditions.
Demand and supply interact in the Wages, Costs and Prices block. Once costs and prices are
established, they determine market shares, which along with components of demand, determine
output.
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Figure REMI-ECOTEC Model: summary structure
The robustness of the modelling approach is assured by the application of methods and validation
appropriate to structural economic models. The comprehensive structural framework is based on
the economic and demographic foundations of the Model, including performance for a broad range
of analyses and economies, and the adherence to a complete, detailed description of economic
interactions. Thus, the economic basis of the Model, as well as the usual statistical information on
key econometric equations, assures the validity of the Model.
Key Features
The Model’s power rests in its ability to generate realistic year-by-year estimates of the total
economic effects of any specific industry trend or policy initiative. A wide range of policy variables
allow the user to represent the policy to be evaluated while the explicit structure in the model helps
the user to interpret the predicted economic and demographic effects. Each calibrated area or
region has economic and demographic variables, as well as policy variables so that any policy that
affects a particular defined region or area can be tested.
Overall, it is worth stressing the following features of the REMI-ECOTEC Model in relation to the
current study:
• The Model has been calibrated to the particular conditions of the study area using a relatively
large amount of Scotland specific data, thus ensuring reliable and accurate performance.
• The Model has an exceptionally strong theoretical foundation.
• It combines a number of distinct analytical components (including economic-base, input-output,
and econometric models), allowing it to take advantage of each specific method’s strengths and
compensate for its weaknesses.
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• It allows users to manipulate an unusually large number of input variables and gives forecasts
for an unusually large number of output variables.
• It allows the user to generate forecasts for any combination of future years (up to 2040),
allowing the user special flexibility in analysing the timing of economic impacts.
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