In an industry reliant on flexible, margin-focused relationships between brands and their suppliers, it’s a rare occurrence that a fashion company would own its factories. For those few that do, it’s a source of pride and a symbol of commitment to and responsibility for its products and the people who make them. In theory, brands owning parts of their supply chains should be celebrated and encouraged for the increased transparency and control it can bring, but in practice, it’s not always that straightforward.
A recent brand-owned factory closure in Sri Lanka highlights the deeply rooted power imbalance of such arrangements, and exposes the precarity of hard-won grievance mechanisms and union agreements. Despite the opportunities for this novel model to provide valuable benefits to all stakeholders, it’s clear that this arrangement can often echo typically unfair buyer-supplier relationships between brands and manufacturers. The recent failures of brand-owned factories begs the question: are unfair trading practices unavoidably baked into the industry? Or can this model ever achieve the desired positive impacts for both parties?
Enter British brand NEXT, a legacy retailer that has had a presence on UK high streets since the 1980s. In recent years, NEXT has acquired a number of homeware, clothing and footwear brands to become an almost £15 ($19) billion business. In May of 2025, shortly after forecasting £1.08 billion 2025/26 profits, the retailer shut down one of three factories it owns in Sri Lanka’s Katunayake region through its subsidiary business NEXT Sourcing Limited. NEXT cited the “increasingly high operating cost of the Katunayake Manufacturing Plant,” in a statement. The company declined to comment when approached for this story.
So far, this isn’t an unusual situation—brands are within their rights to close underperforming factories. But it’s the nature in which NEXT announced the closure—over WhatsApp and to immediate effect—which has sparked concern from worker rights groups like Labour Behind the Label (LBTL) and Clean Clothes Campaign. Further, of NEXT’s Sri Lankan factories, this was the only unionized one, suggesting that the brand had broken trade union recognition agreements and violated labor laws by not following proper procedures established by the Free Trade Zones & General Services Employees Union (FTZ & GSEU).
The labor activists say NEXT failed to follow due process outlined in the agreements made with this facility, and put the factory’s 1,416 employees, many of which had been there for decades, out of work without warning.
“What happened in May is incredibly sad and also very damaging for progress overall,” said Alena Ivanova, campaigns and activism lead at LBTL. “Despite this agreement, and despite years of demonstrated progress and dialog, when NEXT made the decision to close this factory, they completely ignored this established forum for negotiation.”
Ivanova believes it’s not a coincidence that the factory which closed was unionized. “If you think about the impact of unionization, improvement of conditions, including improvement of wages, then there is a correlation there,” she said. In a joint statement, labor rights groups warned that the ramifications of NEXT’s actions will be wider than just one factory. “A UK company that feels able to disregard national laws and collective bargaining agreements is setting a dangerous precedent that organizing for better conditions risks job losses,” they wrote in June.
NEXT isn’t alone in closing an owned factory. In April 2025, U.S. brand Fruit of the Loom (FOL) closed two unionized factories in Honduras, putting 3,000 employees out of work. Twenty-seven human and labor rights groups wrote to the brand, concerned by what appeared to be union-busting efforts by FOL, which attributed the closures to reduced demand from its U.S. customers.
While uncommon, launching or acquiring cut-make-trim (CMT) factories could be beneficial for brands—particularly those that aren’t driven by trends that necessitate a constant rotation of suppliers. “You could argue there would be merit in brands owning some factories for some products, if it’s long term and if it’s core to the business proposition,” said Peter McAllister, responsible business expert and consultant. “Theoretically, you should therefore have better data, better insight and better transparency.”
Being both the buyer and the producer gives brands the opportunity to have a higher degree of control of not only production, but of conditions on-site. Often, brands cite the lack of control as one of many customers in a facility as a barrier for establishing living wages or investing in decarbonization infrastructure like electric boilers or solar panels. “Direct ownership gives brands the chance to have more influence on working conditions, ensuring effective worker representation, fair wages and skills development,” explained Giles Bolton, the executive director of the Ethical Trading Initiative (ETI). “But alone, this factor does not guarantee better outcomes for workers, especially in contexts where local labor laws and their enforcement is weak.”
“Where is the accountability for a brand closing down a factory that it owns in a country that is unlikely to have the horsepower to really take them on?”
—Peter McAllister, responsible business expert and consultant
Indeed, a greater degree of influence can make factories and their workers more vulnerable, because they don’t have other clients to fall back on if a brand pulls out. Mike Stoll, managing director of British brand Private White V.C, which is owned and manufactured in their own Manchester factory, believes that a systemic deprioritization of supply chain relationships creates situations where brands can cut and run from factories, even ones they own. “If I leave my office [in the factory], I’m saying hello to people by name. If you don’t know people’s names, they are meaningless, aren’t they? If [the factory] is far away, and you don’t know the people in Sri Lanka, then shutting them down doesn’t affect you personally.”
It’s a result of widespread offshoring that ramped up in the 1990s, as brands opted for cheaper manufacturing in countries like China or Bangladesh over local production. In the decades since, brand-supplier relationships have become increasingly distant and transactional. As the rise of ultra fast fashion has pushed clothing prices down, brands are producing to razor thin margins, leading them to chase the cheapest needle rather than build long-term working partnerships with suppliers.
With few accountability mechanisms to hold brands to their commitments, the repercussions for abruptly closing facilities are minimal—the NEXT incident barely made headlines in the UK. “Where is the accountability for a brand closing down a factory that it owns in a country that is unlikely to have the horsepower to really take them on?” asked McAllister. “If there’s no regulatory mechanism to hold them to account, then they will go where the economics tell them.”
That could change with the rollout of the Corporate Sustainability Due Diligence Directive (CSDDD). While the European Commission has rolled back and simplified many of the requirements in February’s Omnibus package, for major brands, due diligence will still apply to direct tier 1 suppliers, such as CMT factories. “Regardless of the ownership structure, what matters most is how responsibly brands conduct business,” said ETI’s Bolton. “That means adopting responsible purchasing practices, ensuring robust human rights due diligence and engaging meaningfully with workers and their representatives.”
Undoubtedly, respecting a worker’s right to freedom of association is critical, as trade unions are vital to establishing and negotiating fair working conditions. According to LBTL, in Sri Lanka, median monthly wages for manufacturing workers were LKR 37,000 in 2023 (approximately GBP £93 or USD $125) while unionized workers at NEXT’s factory were on LKR 45,000 (GBP £112 or USD $150). “But it’s not just about the wages, it’s also about instances of verbal abuse and unfair hiring practices that can be flagged through the union, and there’s an established process for reaching agreement on those things. That’s what having a recognized union brings to a workplace,” said Ivanova.
Of course, positive examples of brands that own their factories exist, and can provide a blueprint for how to build profitable businesses with strong supply chain partnerships. Australian brand Outland Denim created its own vertically integrated factory in Cambodia that supports young people who have experienced trafficking or modern slavery through employment, upskilling and career progression opportunities.
In Elgin, Scotland, luxury knitwear brand Johnstons of Elgin owns and operates its own manufacturing and weaving mill. The brand says it’s the largest textile manufacturer to be a registered living wage employer, as well as recognizing trade unions. “I’m not saying that we will see brands en masse going back to building factories,” said Ivanova. “But there are benefits for brands, and that’s probably why smaller brands have started with this commitment for more ethical production.”
While outliers, these brands demonstrate the potential for brands to use factories as positive levers towards progress. Regardless of the ownership model, persistent issues across the industry like a lack of accountability, union busting and a profit-over-people approach to business must be addressed to rebalance the scales and create a more equitable system for the workers in fashion’s supply chains.
