Soaring cotton prices could have major repercussions on the corporate wear sector as suppliers and manufacturers are forced to pass on increased raw materials costs to customers.

They are not alone. High street retailers have already predicted that, after years of cheap, fast fashion, prices will see a hike in the coming year.

Retailers Primark and Next, and brands Levis and Hanesbrands, which owns Wonderbra, have all warned of increases to come. In September, Next chairman Lord Wolfson said that clothing prices would have to go up. “It’s the end of the cycle where clothing prices have come down every year for 15 years. The age of ever-decreasing clothing prices is over,” he predicted.

With cotton prices hitting a 15 year high this year, it has been suggested that a £7.99 T-shirt would have to go up by £1, while a £50 pair of jeans could rise by as much as £5.

But even these predictions could be underestimates, says Glenn Hyams, joint managing director of BTC Activewear. The company recently announced through its website that a number of manufacturers including Fruit of the Loom, Gildan and Russell were raising prices by three to seven per cent. In the corporate wear sector where twice a year price rises have been the norm in recent years, the October increase was unparalleled, he says.

“It’s the first time we’ve ever had a quarterly price increase. They used to be every year and then every six months.”

He predicts that prices will continue to rise in the first half of 2011. “There will be a quarterly review in April and another in July. After that we might start to see stability.”

In the meantime, clients are warned to expect price increases in double digits for the next six months and says that those who predict less are kidding themselves.

There are several reasons for the increases. Firstly demand for cotton is increasing around the world. However 2010 floods in China and Pakistan have hit production badly, with up to a quarter of the cotton crop affected. Cotton futures in China have surged by more than 70 per cent this year and some manufacturers have been pricing on a week by week basis.

Premium organic brands are also finding it tough. In August, Edun, the fair trade label set up by pop star Bono and his wife Ali Hewson, posted losses of £5.8m for the last year – an increase of 90 per cent on the previous year. The company also announced that it was shifting some production from Africa to China due to quality issues. Meanwhile, a recent report by the Soil Association said that sales of organic cotton plateaued in 2009 at around £100m.

However, Mariusz Stochaj, head of products at Continental Clothing says a premium positioning has protected it from the worst of the downturn. Continental has always used premium cotton for its products, which has been less affected by price increases, he says. However he admits that prices will go up and it’s just a matter of how much.

The company produces around six million T-shirts a year, which go to the fashion and promotional markets. “We don’t do £1.20 T-shirts. In the last decade promotional T-shirts have got so cheap that people use them in the most unsustainable way. Giving away a free T-shirt with a six pack is a huge drain on resources and creates something that is not valued,” he says.

The situation has been aided by historically low cotton prices in the past five years, but a change has come.

Chris Woods, director of Incorporatewear says that cotton prices will continue to rise as they have done over the last year. “With long positions being taken particularly in the Far East we expect further rises in the short term although we would hope that some stability occurs by mid-2011. Between now and Chinese New Year, however, given poor harvests across the globe and flooding earlier in the year in Pakistan upward pressure is likely to continue.”

Jawad Jumani, managing director of Livingstone International says that raw cotton prices have been coming down recently, but that there remains a huge uncertainty in the market for cotton. “There are so many stages in the process from fibre to finished garment that there is a time lag before prices are affected. Yarn suppliers are still not passing it on.”

Market speculation is not helping, he adds. “No one is sure what the true price is. Factories are asking for cash up front to secure supplies. It is all in a state of flux and we can only confirm prices to our clients forward about three months at a time in an attempt to manage the risk.”

With cotton supplies unpredictable Stochaj says there could come a point at which man made fibres such as viscose could become more prevalent in collections. Although the company deals first and foremost in cotton for its range of T-shirts, sweatshirts and hoodies, it does also offer sustainable bamboo T-shirts, which are claimed to be light, softer than cotton and machine washable.

Woods says that undoubtedly there is likely to be an increase in the use of man-made fibres, given improvements in recent years in wear quality and the introduction of high-performance fabrics. “There is, however, always a balance to be struck between the use of man-made fibres and the benefits they bring with the greater comfort of cottons and wool,” he says.

Hyams disagrees about man-made substitution. “The price of man-made fibres such as polyester and acrylic have been going up as well, and they tend to be more expensive than cotton anyway. Cotton is still the cheap option.”

Rising labour costs are also having an impact, says Hyams. Man made will also struggle to replace cotton in products like T-shirts because of wearability, he adds.

When it comes to decoration potential, there is little to choose, says Paula Cannon, design manager at Incorporatewear. Clients have to consider the overall effect they are aiming for. “The main challenge faced by designers is to come up with a great design that fits the client’s budget. Consultation with the wearers is essential to understanding the environment and working conditions, this in turn determines the type of fibres suitable for the job.”

Cannon says that 100 per cent cotton is not always the preferred option due to colour fading and the difficulty in washing and ironing. “With the huge advances in fibres with breathable and wicking properties we are seeing a greater demand for man made fibres that are easy care and have various technically advanced properties.”

When it comes to sales, Hyams says that there has not yet been a noticeable drop off in orders. However he says that cut backs in the public sector could yet have an impact on business.

Another blow could be if promotional budgets switch from pricey textiles to more cost effective merchandise such as pens, mugs or calendars. “We haven’t seen it yet, but the next financial year could be telling,” he says.

For the first time in almost a decade, BTC is producing a catalogue without prices on the page. “We’re printing a separate booklet because it’s likely we’ll have to do them again in April and July.”

The current problems could see a fundamental change in the way the corporate wear market operates, says Hyams. “At the moment prices are effectively set for us. It’s a guideline price, but most people stick to it. That might have to change in the future and we’ll set our own margin.”

For now, the upcoming BTC collection will be business as usual with a broad range of products, although with perhaps a little less emphasis on the top end, he says.

But in such a fluid situation, everything could change. Watch this space.

Cotton: decades of change

Cotton remains one of the world’s biggest crops in terms of land area. It is sown on 33 million hectares, behind only wheat, rice and corn, and soy beans.

Since the 1950s, although the area under cultivation has increased, the fibre’s share of the textile market has declined as man-made fibres have been developed and popularised. It now accounts for 36.5 per cent of the textiles market globally following a third year of decline in market share.

As well as competition from other fibres, cotton production has faced other challenges, such as scrutiny of its environmental record through issues such as water and land shortage, pesticide use, and labour abuse. In the past decade this has led to growing consumer demand for a more ethical product, and the introduction of Fairtrade, Organic, Cotton Made in Africa and Better Cotton signposting, providing a better indication of the sustainability of the product.

Price pressure on cotton is therefore merely the latest challenge faced by the cotton sector. As prices drop to a more manageable level later this year, the challenge will return to how it can continue to create a new, greener and more sustainable image for itself.