Baird jobs to go as M&S severs 30-year contract

As the high-street giant wields the axe, its other UK suppliers face an uncertain future

Marks & Spencer dealt a devastating blow to Britain's struggling clothing industry yesterday when it severed an agreement with one of its biggest suppliers in a move that could lead to up to 4,300 job losses.

Marks & Spencer dealt a devastating blow to Britain's struggling clothing industry yesterday when it severed an agreement with one of its biggest suppliers in a move that could lead to up to 4,300 job losses.

The axe has fallen on William Baird, which has supplied Marks & Spencer with underwear and other clothing for 30 years. Baird sells 40 per cent of its output to M&S but will now be forced to review the future of its 17 UK factories.

The move follows a review of M&S supply agreements as it seeks to cut costs in the face of intense competition that has forced it to issue two profit warnings in the past year.

M&S accounts for a quarter of all UK clothing production, and up to 100,000 textile jobs rely on M&S contracts.

A spokeswoman for M&S would not rule out further cuts: "Our review is still continuing. A small number of other suppliers may be affected but not on the same scale as Baird."

William Baird's chief executive, David Suddens, said he was "surprised, shocked and disappointed" by the decision.

Mr Suddens said he was contacted by Peter Salsbury, the M&S chief executive, on Wednesday.

Mr Suddens said that Baird had been targeted because it was only the fourth-largest M&S clothing supplier, after Coats Viyella, Courtaulds Textiles and Dewhirst.

Baird supplies M&S with lingerie, ladies' skirts, blouses and trousers, men's shirts and trousers and some coats. However, it is not thelargest supplier of any single item, which made it vulnerable.

M&S justified its decision, by saying it was moving more of its clothing sourcing overseas to lower costs.

"We need to offer good value for money. We are taking the economic realities of the high street and applying that to our supply base."

M&S used to buy almost 90 per cent of its clothing from UK suppliers. This figure has fallen to 55 per cent as cheaper overseas suppliers emerge, and is set to fall to 50 per cent.

Although Baird has no formal contract with M&S, the two will meet next week to discuss compensation. Baird said it was unlikely that its entire UK workforce of 4,300 would be affected.

Baird shares slumped 26 per cent to 285p on the news. Other textile shares were also affected as the market feared M&S may make other cuts.

Shares in M&S also fell 5p to a new seven year low of 285p, though analysts were positive on the news. "It shows they are serious about rationalising the supply base," one said.

Richard Hyman of Verdict, the retail consultants, said the cuts were inevitable. "We're entering a new phase of intense competition, low growth and low margins. Retailers have to make sure their sourcing is as good as it can be. Up to now M&S hasn't done that."

M&S is due to report interim figures on 2 November.

Unions reacted angrily to the cuts. Des Farrell, the national secretary of the GMB's clothing and textiles division, said: "This is bound to have a knock-on effect at other firms that supply Baird and job losses could be two or even three times as bad."

Mr Suddens said that much of the UK textile industry had been wiped out in the recession of the Eighties and that what had survived was largely due to M&S. He denied that M&S' support had made UK firms slow to change. "But you could argue that the industry should not have allowed itself to become so dependent on one customer," he said.

Baird will now concentrate on its remaining business, called Baird Brands. It includes Dannimac, Tenson and Windsmoor as well as recent acquisitions such as Lowe Alpine, the outdoor clothing group.

Baird has already announced the closure of seven UK factories, with costs of £8m.

In the six months to June, Baird clothing made a pre-exceptional loss of £4m on sale of £80m.

A spokesperson for Coats Viyella said that the company did not anticipate any change in its relationship with M&S as a result of M&S's announcement. Dewhirst refused to comment.

Coats Viyella shares closed 2p lower at 45.5p. Dewhirst shares edged 3.5p higher at 72.5p.

Three top contenders

Courtaulds Textiles

Annual sales: £893m

Total workforce: 23,000

Number of UK factories: 44

Marks & Spencer currently accounts for about 40 per cent of Courtaulds' sales, and the group yesterday sought to reassure investors, saying that it was confident of its position as a long-term supply partner to the high-street giant. Its shares, which hit 512p in 1995, yesterday ended 1.5p off at 129p.

Dewhirst Group

Total annual group sales: £380m

Total workforce: 12,590

Dewhirst supplies clothes and toiletries to M&S, which accounts for 90 per cent of its annual sales. Last month the group warned that difficult trading conditions were set to continue as it reported a £2m fall in profits before tax in the six months to July to £10m compared with the same period in 1998. Dewhirst shares, which dived 20 per cent on the announcement by William Baird, ended up 3.5p at 72.5p.

Coats Viyella

Total annual group sales: £2.07bn

Annual sales to M&S: 12 per cent

Total workforce: 62,943

Coats Viyella shares yesterday fell 1.75p to 45.5p, taking the market value of the one-time FTSE 100 constituent to £320m. The company's clothing division, whose major contract is with M&S, turned a operating profit of £1.9m in 1998, but the division only accounts for 12 per cent of its annual sales, as Coats positions itself as a leading thread-maker.