Europe’s Garment Slowdown Threatens Bangladesh’s Export Engine

Bangladesh’s garment industry is facing a potentially dangerous squeeze as soaring production costs at home collide with weakening consumer demand in its biggest export market, threatening to erode the country’s hard-won position in the global apparel trade.

Higher gas and electricity prices, rising wages, expensive financing and exchange-rate volatility are eating into manufacturers’ margins just as inflation and economic uncertainty are forcing European consumers to tighten their belts and buy fewer clothes.

The warning has been sounded by Inamul Haq Khan, Senior Vice-President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Managing Director of Ananta Garments Limited, in an exclusive interview with The Daily Observer.

“If European consumers once bought seven or eight garments a year, many are now buying only four or five. This sharp drop in consumption is directly hitting apparel sourcing and export orders from Bangladesh,” Khan said.

He said Bangladesh’s ready-made garment (RMG) industry had entered a defining phase in which simply increasing export volumes would no longer be enough to safeguard its future.

“Global buyers now demand much more than competitive prices. They increasingly expect full traceability, strict environmental compliance and higher value-added products,” he said.

The industry, he warned, must prepare for a far tougher competitive landscape following Bangladesh’s graduation from the Least Developed Country (LDC) category by securing new trade agreements, strengthening energy security, expanding value-added production and consolidating its position as a global leader in green manufacturing.

Despite the mounting challenges, Khan said Bangladesh still had enormous scope to expand its share of the global apparel market as international brands continued to diversify their sourcing bases.


“The next three years will be challenging, but they will also create new opportunities. Bangladesh has a skilled workforce, experienced entrepreneurs, strong compliance standards and the world’s largest number of green garment factories. These strengths will help us remain a leading global sourcing destination,” he said.

Europe’s shrinking wardrobe
Khan said export orders had shown some improvement in recent months, but the recovery should not be mistaken for a broad-based revival in global demand.

Rather, the modest improvement has been driven largely by Bangladesh gaining market share and by changing consumer purchasing patterns in Europe.

The Russia-Ukraine war, he said, had fundamentally altered consumer behaviour across the continent, with persistent inflation and economic uncertainty forcing households to cut discretionary spending.

“If European consumers previously bought seven or eight garments a year, many are now buying only four or five. That reduction directly affects apparel sourcing and export orders from Bangladesh,” he said.

The prolonged conflict could make the situation even more unpredictable, he warned, making it increasingly difficult for manufacturers to forecast demand and plan production as global markets remain hostage to geopolitical uncertainty.

Costs rise, margins shrink
Even with a modest improvement in exports, profitability remains under severe pressure.

Manufacturers are grappling with a relentless rise in production costs stemming from higher gas and electricity prices, wage increases, financing expenses and exchange-rate volatility, while international buyers continue to press for lower free-on-board (FOB) prices.

The result is a widening squeeze between what Bangladesh’s factories must pay to produce garments and what global buyers are willing to pay for them.

Against this backdrop, Ananta Garments is prioritising productivity and operational efficiency rather than simply chasing higher production volumes.

“Our target is sustainable profitability through higher productivity,” Khan said.

The company is investing in lean manufacturing, digital production monitoring, automation, waste reduction, energy efficiency and supply-chain optimisation to raise factory efficiency without compromising quality or delivery schedules.

He also stressed that investment in workers through continuous skills development would be crucial to raising labour productivity and maintaining Bangladesh’s competitive edge.

Energy crisis: the Achilles’ heel
Khan identified energy insecurity as one of the most serious threats to Bangladesh’s export competitiveness.

Many factories, he said, are struggling with inadequate gas supplies, while frequent power disruptions continue to rob industrial zones of valuable production hours.

“Factories cannot operate without gas. When LNG supply is interrupted and Floating Storage and Regasification Unit (FSRU) operations face problems, industries become fully dependent on the local gas network, which is not enough,” he said.

Factories operating under DESCO in Tongi, however, are comparatively better placed, he said, with more reliable power supplies than those served by the Rural Electrification Board (REB).

Cost of doing business bites deeper
The rising cost of doing business is adding another layer of pressure on manufacturers.

Annual wage increments, persistent inflation, higher utility charges and increased financing costs are steadily eroding profit margins. Khan also pointed to an uneven distribution of policy support between different segments of the garment industry.

Many woven-garment exporters, he said, are not receiving the same level of policy support enjoyed by knitwear and sweater manufacturers.

Incentives linked to locally produced cotton and value addition tend to benefit knit and sweater factories that use local yarn, while woven exporters receive fewer advantages despite facing many of the same cost pressures.

Trade deals vital after LDC graduation
Looking towards Bangladesh’s LDC graduation, Khan warned against putting all hopes on the Generalised Scheme of Preferences Plus (GSP+).

Bangladesh’s apparel exports to the European Union have already crossed the threshold that could restrict access to some GSP+ benefits after graduation, he noted.

The government therefore needs to move faster to secure Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs) and Comprehensive Economic Partnership Agreements (CEPAs) with major export markets.
“Trade agreements will become increasingly important after LDC graduation. We must prepare now instead of waiting until the transition begins,” he said.

Bangladesh is currently scheduled to graduate from the LDC category in November 2029. Khan said the country must make full use of the remaining preparation period to build a stronger and more resilient export base.

If the proposed three-year extension is approved internationally, he said, Bangladesh would gain additional breathing space to strengthen its competitiveness.

Green manufacturing no longer optional
Sustainability, Khan said, has ceased to be a branding exercise and has become a basic condition for competing in major international markets.

Global buyers increasingly demand traceability, environmental compliance, resource efficiency and higher value-added products alongside competitive prices.

To meet those demands, Ananta is expanding its production of performance wear, functional garments and fashion-oriented apparel while strengthening design, innovation and product-development capabilities.
The company is also investing in energy-efficient production, water conservation, waste recycling and internationally recognised compliance standards.

Bangladesh’s growing leadership in LEED-certified green factories, circular production, garment recycling, carbon reduction and sustainable manufacturing represents a major competitive advantage, he said.
“We are not starting from zero. Bangladesh has already made remarkable progress in green manufacturing, efficiency, productivity and sustainability. These investments will help us meet future buyer requirements,” Khan said.

Financing remains a major headache
Financing is another major concern confronting manufacturers.

Khan said Bangladesh Bank’s one-time exit facility had been introduced to provide temporary relief to financially stressed exporters, but many manufacturers remained uncertain whether the measure would be sufficient to ease the sector’s broader financing constraints.

He called for continued review of financial support measures, alongside urgent improvements in logistics, port efficiency, energy security and the overall ease of doing business.

“The RMG industry remains the backbone of Bangladesh’s exports, employment and economic growth. Our future will not depend only on producing more garments. It will depend on producing better products with higher value, stronger sustainability and greater innovation,” he said.

“If the government and industry work together, Bangladesh can strengthen its position as one of the world’s leading apparel sourcing destinations in the years ahead.”