The framing most UK clothing brands use when discussing domestic manufacturing costs is wrong. They talk about “the cost of living crisis” adding pressure to UK production — as if this is a recent problem with a likely end date. It is not. UK manufacturing wages have been rising at structural rates since 2016. The cost increases brands are experiencing in 2025–2026 are not an anomaly. They are the continuation of a decade-long trajectory that will continue.
The more useful framing is this: UK clothing manufacturing costs have risen substantially and predictably. Brands that planned for this in their pricing structures are managing it. Brands that built price architectures on 2021 cost assumptions and expected them to hold are not.
This article covers what has actually changed in UK manufacturing costs since 2022, what the current NLW trajectory means for garment production pricing, and what strategies brands use to manage a cost base that will continue rising.
For context on how UK manufacturing costs compare to offshore alternatives, see the Complete Guide to Clothing Manufacturers in UK.
Contents
- 1 Post Highlights
- 2 How Much Have UK Clothing Manufacturing Costs Risen Since 2022?
- 3 National Living Wage Increases — Impact on Garment Production
- 4 Energy, Rent, and Overhead Cost Rises for UK Factories
- 5 Forecasting UK Manufacturing Costs 2025–2027
- 6 How to Manage Rising UK Manufacturing Costs as a Brand
- 7 Is the UK Still Competitive Despite Wage Increases?
- 8 FAQ
- 9 Citations and Sources
Post Highlights
- The National Living Wage rose from £8.91 in April 2021 to £12.71 in April 2026 — a cumulative increase of 42.6% in five years, representing the fastest sustained wage growth in the UK minimum wage’s history
- From 1 April 2026, the NLW is £12.71 per hour (up 4.1% from £12.21), confirmed in the Autumn Budget 2025 and accepted by government in full (Source: Low Pay Commission / GOV.UK, 2026)
- The Real Living Wage — now paid by over 16,000 accredited UK employers — rose to £13.45 per hour UK-wide and £14.80 in London from May 2026
- UK non-domestic electricity prices peaked at 28.39p/kWh in Q4 2023 — over 90% above the 14.81p/kWh level in Q1 2021. By 2024 they had eased to approximately 25.97p/kWh — still materially higher than pre-crisis levels (Source: ONS, 2025)
- Make UK’s 2025 research found that 65% of manufacturers say high energy costs reduce their ability to compete
- For UK garment manufacturers with predominantly minimum wage workforces, total labour costs — including employer National Insurance contributions — will be significantly higher in 2026 than any pre-2022 pricing model assumed
How Much Have UK Clothing Manufacturing Costs Risen Since 2022?
The answer requires separating three distinct cost components: labour, energy, and fixed overheads (rent, insurance, compliance). Each has a different trajectory.
Labour: the largest and most predictable component. Labour typically accounts for 50–70% of a CMT (cut, make, trim) garment manufacturing cost structure. Since the National Living Wage was introduced in April 2016 at £7.20 for workers aged 25 and over, the rate has risen every April. The acceleration has been sharp since 2022:
- April 2022: £9.50 (+6.6% from 2021)
- April 2023: £10.42 (+9.7%)
- April 2024: £11.44 (+9.8%)
- April 2025: £12.21 (+6.7%)
- April 2026: £12.71 (+4.1%)
Cumulative increase from April 2021 (£8.91) to April 2026 (£12.71): +42.6% in five years. (Source: GOV.UK / Low Pay Commission)
This is not inflation-driven price drift — it is statutory wage policy. Unlike energy costs, which fluctuate with market conditions, the NLW increases are announced months in advance and follow a predictable trajectory. The Low Pay Commission’s remit from government is to keep the NLW at or above two-thirds of median UK hourly earnings — a policy that will continue to drive above-inflation increases until that benchmark is sustainably met.
Energy: volatile but structurally elevated. UK non-domestic electricity prices rose from 14.81p/kWh in Q1 2021 to a peak of 28.39p/kWh in Q4 2023 — a rise of over 90% in three years. By 2024 they had eased to approximately 25.97p/kWh — still 75% above the pre-crisis baseline. (Source: ONS, The Impact of Higher Energy Costs on UK Businesses: 2021 to 2024, May 2025)
For garment manufacturing operations, energy costs cover machinery operation (sewing machines, overlockers, pressing equipment), heating and lighting of premises, and where applicable, laundry and finishing operations. These are real costs, but energy typically represents 5–15% of total manufacturing cost in a garment factory — significant, but less material than the labour component.
Fixed overheads: steady pressure. Commercial rents, insurance, and regulatory compliance costs have increased with general inflation. Business rates, employer National Insurance contributions (which rose from 13.8% to 15% from April 2025, adding to the cost of every wage increase), and payroll processing costs compound the direct wage increase impact.
National Living Wage Increases — Impact on Garment Production
The most direct impact of the NLW trajectory is on CMT (cut, make, trim) manufacturing pricing — the labour-only element of production where the wage floor is most directly relevant.
For a sewing machinist paid at the NLW working a 37.5-hour week:
| Year | NLW Rate | Annual Gross Pay (37.5h/wk) | Annual Employer NI (approx.) |
|---|---|---|---|
| April 2021 | £8.91 | £17,360 | ~£1,995 |
| April 2022 | £9.50 | £18,525 | ~£2,222 |
| April 2023 | £10.42 | £20,319 | ~£2,592 |
| April 2024 | £11.44 | £22,308 | ~£2,960 |
| April 2025 | £12.21 | £23,810 | ~£3,332 |
| April 2026 | £12.71 | £24,785 | ~£3,579 |
Source: Low Pay Commission rates; employer NI calculations based on GOV.UK rates and thresholds (secondary threshold applied)
The combined increase in annual gross pay plus employer NI from 2021 to 2026 is approximately £9,000 per full-time worker — a cost increase that has to be absorbed by the manufacturer or passed through in CMT pricing, or both.
From April 2025, the employer National Insurance rate increased from 13.8% to 15%, and the secondary threshold (the earnings level at which employer NI becomes payable) fell from £9,100 to £5,000. This means the NI cost applies to a larger portion of each worker’s wage, amplifying the impact of every NLW increase on total employment cost.
The Low Pay Commission noted in its April 2026 analysis that businesses adapt to NLW increases through a combination of price increases, efficiency improvements, and in some cases reduced headcount or hours. For garment manufacturers operating at thin margins with predominantly manual, skilled production processes, efficiency improvement options are more limited than in other sectors — making price pass-through the primary adjustment mechanism. (Source: Low Pay Commission, National Minimum Wage in 2026, GOV.UK)
Energy, Rent, and Overhead Cost Rises for UK Factories
Energy. UK electricity prices for non-domestic users peaked in 2023 at over 90% above 2021 levels and remain structurally elevated. Make UK’s 2025 research found that 65% of UK manufacturers say high energy costs reduce their ability to compete. The British Industry Supercharger scheme (introduced in 2024) exempts energy-intensive industries from 60% of network costs and key renewables policy costs — but garment manufacturing, which is not classified as an energy-intensive industry under the scheme, does not benefit from these exemptions. (Source: ONS, The Impact of Higher Energy Costs on UK Businesses: 2021–2024; Make UK / Tritility, 2026)
Employer National Insurance. The increase in employer NI from 13.8% to 15% from April 2025, combined with the reduction in the secondary threshold to £5,000, represents an additional cost of approximately £900 per full-time employee per year on top of the NLW increase itself. For a factory employing 20 workers, this is approximately £18,000 per year in additional payroll cost before the NLW rise is factored in. The British Retail Consortium estimated in 2025 that the April 2025 NLW hike added £7 billion in extra costs across the UK retail sector — costs that flow through to supplier pricing expectations. (Source: IBISWorld UK Clothing Retailing 2025)
Premises and rents. Industrial premises costs vary significantly by region. Yorkshire, the East Midlands, and outer London offer the most accessible manufacturing premises for garment producers. Commercial rents have increased with general inflation but at lower rates than labour costs and have shown some stabilisation in 2024–2025 following the post-pandemic reset.
Forecasting UK Manufacturing Costs 2025–2027
The Low Pay Commission’s 2026 remit from government specifies that two-thirds of median UK hourly earnings should continue to be the key reference point for future NLW rates. Based on current wage growth forecasts, this implies continued NLW increases in the 3–5% range annually through 2027. (Source: Low Pay Commission, National Minimum Wage in 2026)
Indicative NLW trajectory (projected):
| Year | NLW Rate (projected) | Note |
|---|---|---|
| April 2026 | £12.71 | Confirmed |
| April 2027 | £13.00–£13.30 (est.) | LPC remit range; forecast subject to wage growth data |
These are projections, not confirmed rates. The LPC makes annual recommendations based on prevailing economic conditions. The government’s policy direction — keeping NLW at or above two-thirds of median earnings — provides a structural floor that makes continued increases more likely than not.
Energy costs: the Bank of England’s February 2026 Monetary Policy Report noted that energy inflation is expected to remain a factor through 2026. Manufacturing-sector electricity and gas prices remain elevated relative to pre-2021 levels. A return to 2020 cost levels is not anticipated in current forecasts.
How to Manage Rising UK Manufacturing Costs as a Brand
The strategies that work in this environment are structural, not reactive.
Build NLW trajectory into forward pricing. The NLW rate for April 2027 will be announced in late 2026. Brands that negotiate CMT pricing with UK manufacturers on annual or multi-year contracts should model in NLW increases — not hold pricing flat and absorb the increase reactively. A 4–5% annual labour cost increase is entirely foreseeable; treating it as a surprise each April is a planning failure.
Separate the CMT price from the material cost. CMT pricing (the labour cost of cut, make, and trim) is the component most directly affected by NLW increases. Fabric, trims, and accessories are not. Pricing structures that combine CMT and materials into a single quoted price obscure which component is rising. Brands should negotiate CMT and materials separately to understand and manage the actual cost drivers.
Increase style efficiency. Labour cost per unit is a function of both the wage rate and the time required to produce the unit. Complex styles with intricate construction, heavy embellishment, or multiple components have higher labour minutes per unit and therefore amplify the impact of every wage increase. Designers who work closely with production teams to optimise construction without sacrificing quality can meaningfully reduce the impact of NLW increases on finished cost.
Plan minimum order quantities carefully. UK manufacturers achieve lower CMT per-unit costs at higher quantities — fixed overhead and setup costs are spread across more units. Brands that regularly order at minimum quantities pay proportionally more per unit for UK production than those that can consolidate orders. Where brand growth allows, increasing order quantities reduces effective per-unit CMT cost even as the hourly wage floor rises.
Use UK production where the premium is recoverable. The commercial case for UK production depends on whether the price premium it supports — through British craftsmanship positioning, shorter lead times, or supply chain transparency — is greater than the cost premium it requires. The analysis in our Complete Guide to Clothing Manufacturers in UK covers this in full.
Is the UK Still Competitive Despite Wage Increases?
Wage rates alone do not determine manufacturing competitiveness. The relevant comparison is total landed cost — the sum of production cost, import duties, freight, and quality failure costs — not the raw labour rate.
| Cost Factor | UK Domestic | Bangladesh (as example) |
|---|---|---|
| Labour (CMT) | High — NLW £12.71/hr | Low — legal minimum ~£0.50–£0.70/hr equivalent |
| Import duty | 0% | 0% (DCTS) |
| Sea freight | Not applicable | £1.00–£2.50/garment est. |
| Lead time | 5–9 weeks | 16–24 weeks |
| Rejection/rework costs | Low (closer QC) | Variable (offshore QC harder) |
| Minimum order | Low | Often higher |
| Carbon cost | Lowest | Higher transport |
Source: Silk Routes manufacturing experience; HMRC UK Trade Tariff; UKFT Industry Intelligence 2024
UK manufacturing is price-competitive in a narrower set of use cases: small and medium orders where offshore minimums don’t apply; fast-response and replenishment production where lead time is critical; and premium positioning where British origin supports higher retail prices. It is not and has not been price-competitive for commodity volume production.
The wage trajectory does not change this fundamental structure — it means the break-even point shifts slightly upward each year. Brands that understand this build their UK production programmes around use cases where total value, not just cost, justifies the decision.
FAQ
How much has the National Living Wage increased since 2021?
From April 2021 (£8.91) to April 2026 (£12.71), the NLW has increased by £3.80 — a cumulative rise of approximately 42.6% in five years. This is substantially above general inflation over the same period and represents the fastest sustained rate of minimum wage growth in the UK’s history.
What is the National Living Wage from April 2026?
From 1 April 2026, the National Living Wage for workers aged 21 and over is £12.71 per hour — a 4.1% increase from the previous rate of £12.21, representing a 50p rise. The rate was recommended by the Low Pay Commission in November 2025 and accepted by the government in full. (Source: Low Pay Commission / GOV.UK)
How do NLW increases affect UK garment manufacturing prices?
Labour typically accounts for 50–70% of a CMT garment manufacturing cost structure. Every NLW increase therefore flows through to CMT pricing in direct proportion to its labour share. A 4.1% NLW increase applied to a garment where labour is 60% of cost produces approximately a 2.5% total cost increase — plus the additional employer NI on the higher wage. Manufacturers absorb some of this through efficiency improvements but pass through the majority as CMT price increases.
Will UK manufacturing costs continue to rise?
The Low Pay Commission’s remit from government — to keep the NLW at or above two-thirds of median UK hourly earnings — implies continued above-inflation NLW increases until that threshold is sustainably met. Energy costs remain structurally elevated above pre-2021 levels. Employer NI costs increased from April 2025 and will not revert. The realistic planning assumption for UK manufacturing cost is continued annual increases in the 3–6% range.
How can brands manage rising UK manufacturing costs?
The most effective approaches are: building NLW trajectory into forward pricing negotiations rather than absorbing increases reactively; separating CMT and material costs in pricing structures; working with production teams to optimise style construction and reduce labour minutes per unit; and deploying UK production selectively in the use cases where its total value (short lead times, British origin premium, lower minimum orders) justifies the cost premium.
Citations and Sources
[1]. GOV.UK / Low Pay Commission — The National Minimum Wage in 2026: NLW rate £12.71 from April 2026 (+4.1%); two-thirds of median earnings remit confirmed. https://www.gov.uk/government/publications/the-national-minimum-wage-in-2026/the-national-minimum-wage-in-2026
[2]. GOV.UK — National Living Wage rates: £12.21 confirmed for April 2025; historical rate series. https://www.gov.uk/government/news/national-living-wage-to-increase-to-1221-in-april-2025
[3]. ONS — The Impact of Higher Energy Costs on UK Businesses: 2021 to 2024 (electricity peak 28.39p/kWh Q4 2023; eased to 25.97p/kWh 2024; 90%+ rise from 2021 baseline). https://www.ons.gov.uk/economy/economicoutputandproductivity/output/articles/theimpactofhigherenergycostsonukbusinesses/2021to2024
[4]. British Retail Consortium — April 2025 NLW impact: £7 billion in additional costs across UK retail sector (cited in IBISWorld UK Clothing Retailing 2025). https://ukft.org/industry-reports-and-stats/
[5]. Low Pay Commission — The National Minimum Wage in 2026 (April 2026 uprating report: rates, household income impact, inflation analysis, remit for 2027). https://assets.publishing.service.gov.uk/media/69cbe06e024cdf09254f3f92/2026_Uprating_report_v2.pdf
