A forthcoming report on the clothing industry is likely to recommend that Irish companies outsource some of their production to low-cost economies like Morocco where Fruit of the Loom is moving part of its operations.
The clothing sector review group, which is chaired by the Department of Enterprise, Trade and Employment, includes representatives of the industry, FAS and Enterprise Ireland and is finalising its report which will form a strategy document for the industry's future.
Members of the review group recently visited Denmark where more than 90 per cent of clothing production has been outsourced - mainly to Poland.
Sources indicate that while the report will not suggest outsourcing on that scale, it will advise Irish companies significantly to increase their outsourcing because of high labour costs here.
The report is not expected to speculate on the employment implications of such a move. However, sources have told The Irish Times that a significant reduction from the present 12,000 people employed in the industry can be expected if the outsourcing recommendation is implemented.
The report will say that companies which produce large volumes of basic garments on contract, are most suitable for outsourcing arrangements.
This would allow production to take place abroad, but sales, administration, design and marketing would be retained in the Republic.
The thinking behind the move is that if the production remained entirely at home, more employment would be lost than if there were a partial move to outsourcing.
The main driving force behind outsourcing is labour costs which most Irish clothing manufacturers expect to rise in coming years.
Mr Victor Buckley, managing director of Styletex Ltd, which manufactures women's and children's garments at a plant in Artane, Dublin, says the introduction of the minimum wage and a serious skills shortage in the industry will mean increased wages.
His company has already done trials in Morocco and while he expects to retain most of the employment in Artane, he says some outsourcing is likely.
According to international management consultants, Werner International, hourly wages in the clothing sector in Poland are £1.05p and in Lithuania they are 0.30p. This compares with an hourly wage in the Republic of £5.29.
The fact that hourly clothing wages in Denmark are £8.74p explains why outsourcing has taken place on such a large scale there.
But sources say the Danish model will not be fully embraced by the Irish clothing industry because the resultant jobs losses would be exceptionally severe.
When outsourcing was introduced in Denmark in 1990 there were 13,668 people involved in clothing; by this year that had fallen to 5,941.
Mr Jens Bollerup-Jensen, the managing director of the Federation of Danish Textiles & Clothing, says he believes the Republic will have to outsource to compete with its European competitors, which are already doing it. "There is no other way, the labour costs are just too high everywhere in western Europe," he says.
He adds that if labour costs rise in countries like Morocco and Poland, the clothing companies of Europe and the US will move to another low-cost location, most likely Vietnam or Russia. It is, he adds, the ultimate example of mobile industry.
The Irish Clothing Manufacturers Federation (ICMF), which is affiliated to IBEC, says other issues are important in the Republic, like links to the State's main design colleges.
Mr Fergus Ledwith, who works in the clothing and textile section of Enterprise Ireland, says the Republic's distance from low-cost markets means that outsourcing will not be easy.
Mr Buckley points out that many Irish clothing manufacturers are already operating in Morocco and Lithuania. However, he says those who continue to manufacture at home will retain some advantages. "They can deliver to a market like Britain quicker than those in eastern Europe," he says.
