2000s >> 2007 >> no-1231-march-2007

Burberry applies the law of profit

Last September Burberry announced that its Treorchy factory was no longer viable and would close this March with the loss of 309 jobs

Until the summer of 2006 , it is probably true to say that the village of Treorchy was little known outside Wales – except to devoted enthusiasts of Welsh male voice choirs. Nestling in the shadow of steep and rocky hills, the village lies at the head of the Rhondda Valley and is typical of the abandoned communities that were originally established to mine the now worked-out coal of the South Wales valleys.

The Rhondda Valley is today an area of demoralising deprivation,characterised by dire poverty, poor housing and a drug problem that is almost out of control. Many of Treorchy’s ageing 8,000 strong community have chronic health and anxiety conditions. Unemployment is abnormally high and such local jobs as exist, mainly in retail, are difficult to come by. The village has one large employer of note – the factory owned by the iconic brand name Burberry.

Burberry was established in the middle of the nineteenth century when its founder Thomas Burberry invented a method of waterproofing cloth, which he called gabardine. Since the 980s the company has successfully expanded the brand into a variety of luxury and fashion goods, including clothing, sportswear, watches, and perfumes and has enjoyed rapid international growth. Burberry’s first half results to September 2006 showed an increase in the company’s turnover of 10 percent to nearly £400 million and an increase in operating profit of 7 percent to £84 million. (burberryplc.com, 14 November 2006 .) The employees of Burberry in Treorchy had every reason to feel assured – after all, it had been their sacrifices that had contributed to the company’s startling success. But the events that were about to unfold showed their confidence had been seriously misplaced.

At the beginning of September Burberry announced that its Treorchy factory was no longer viable and that it would close in March 2007 with the loss of 309 jobs. The company said that rising costs could no longer be recovered by raising worker productivity and that skill shortages and a decline in the local supplier network meant that the factory no longer had a future. Burberry had been the community’s main employer for generations, and its workers, many of whom had been employed for 40 years, were stunned. Their union, the GMB, had received no warning of the closure or of company plans to transfer the production of designer polo shirts to China.

Outraged Burberry workers and their union organised themselves to resist the closure. While public protests against factory closures are not new, what was different about this campaign was its success in turning the threat of closure into a public relations battle that rapidly mobilised public opinion. They lobbied politicians and successfully sought the support of celebrities to keep the issue in the public eye to shame the company into reconsidering and to persuade customers not to buy the its products. The campaign quickly became a public debate about whether a successful company hailed as a British icon and already enjoying healthy profits should simply be ‘allowed’ to pack up and abandon a small community.

Burberry is heavily dependent on the sales of its goods in other countries. In these countries the company has always marketed itself as a quintessentially ‘British’ brand, an appeal that has been summed up by the journalist Janet Street-Porter with the words, ‘To many, Burberry is just as British as the Union Jack’. Burberry workers and politicians have endeavoured to exploit this connection to argue that if the company’s success is so dependent on its ‘Britishness’, then it has an obligation to take care of its workers in Britain and treat them ‘fairly.’ Such appeals to economic patriotism have invoked issues of corporate accountability and nurtured a view amongst politicians that, while this type of behaviour may be expected from ‘foreign’ companies, this does not mean it is acceptable from a British employer.

The support from celebrity figures, many representative of the kind of people who have the money to buy the Burberry brand, has been an important factor in keeping the closure in the news. Amongst those who have offered their support – promoting their ‘Welsh credentials’ and enhancing their own public image in the process – are Bryn Terfel, Emma Thompson, and actor Ioan Gruffudd, who until recently modelled Burberry fashionware. More recently the tax exile entertainer Tom Jones, who hasn’t lived in Wales for decades, has added his support and Manchester United’s Sir Alex Ferguson has also lent his name to the campaign. Other objectors include the Prince of Wales and interestingly the Church of England, which has investments in the company and has written to Burberry questioning its proposals to close its factory. There is no evidence, however that, as a shareholder in the company, the Church is offering to forgo its dividend if Burberry keeps its factory open.

The politicians – with an eye on this May’s Welsh National Assembly elections – have also been trumpeting their support for the stricken workforce. In October last year Leighton Andrews, Assembly Member for Rhondda, put a ‘Statement of Opinion’ to the Welsh Assembly deploring the closure, and Rhondda MP Chris Bryant put down an Early Day Motion at Westminster calling for Burberry to reconsider its decision.

In November 2006 the workers gained further publicity by staging a public protest outside the company’s prestige New Bond Street store in London. After he had seen which way the wind was blowing, muted criticism also came from Wales and Northern Ireland Secretary Peter Hain, who said such an ‘iconic British brand’ should not be made abroad.

The public relations battle continued in January 2007, when Burberry chairman John Peace and its chief executive Angela Ahrendts were called before the Commons Welsh Affairs Select Committee to give evidence to its inquiry on globalisation. This intervention followed criticism of Burberry bosses over the insensitivity of Christmas bonuses given to its Treorchy workers – a Burberry scarf and a £30 voucher to spend in its stores. As well as this,Chris Bryant MP is urging Parliament to revoke Burberry’s Royal Warrant if the company proceeds with the closure, asserting that these should only go to British companies with a ‘fair employment policy’ (news.bbc.co.uk/1/hi/wales, 3 January 007). The issue has even gone to the European Parliament, MEP Jill Evans saying, ‘I will be calling for corporate social responsibility to be made legally binding’ (South Wales Echo,9 January 007). It is hard, however,to see these activities as other than cynical and meaningless gestures designed to placate disgruntled voters who are threatening to give Labour politicians in Wales a rough ride in May.

Burberry, for its part, has continuedto resolutely defend its ‘Britishness’,recently saying, ‘We are proud of our British heritage and we continue to design and manufacture in the UK’ (Observer, January). The company has been keen to point out that after the closure it will still employ some ,000 workers at its Castleford and Rotherham factories in Yorkshire. Its third quarter results for 2006 (announced in January 2007), show, furthermore, that the high profile campaign against the brand has done little to dent sales and profitability. Chief executive Ahrendts said, ‘This outstanding quarter has been led by Burberry’s strong retail performance,’ prompting broker Merrill Lynch to hail the company as ‘one of the most promising stories in the sector’ leading to forecasts that Burberry revenue could exceed the £ bn mark by March 2009 (www.yorkshiretoday. co.uk, January). Burberry’s management appears to have correctly calculated that the bad publicity arising from the closure of its Treorchy factory would not arrest rising sales and profitability. This is because Burberry is a brand that is aimed almost exclusively at an elite of shoppers who mainly live in other countries. Its products are outside the purchasing power of the average working class shopper and the company has nothing to fear from a boycott by workers on the minimum wage, including those employed at its British factories.

The anticipated closure of the factory bringing the prospect of hardship, misery and trauma to Treorchy should of course be condemned, not only in South Wales but everywhere where workers daily suffer a similar fate. But however well meaning and sincere this condemnation, it is not enough, and cannot alter the mechanisms that make such events an accepted part of the economic system in which we live.

The workers at Burberry are engaged in a battle against capital, which like workers everywhere they ultimately cannot win. Employment is created only when there is an expectation that the goods produced by workers will realise profit when sold on the market. Profit comes from the employment of working people and continued employment is dependent on continued profitability. Capital investment follows profitability, which means that if profitability cannot be maintained or the prospect of greater profit arises elsewhere, then the jobs upon which wage and salary earners are reliant will be terminated.

Like many other successful brand names, Burberry is looking to divest itself of its traditional productive workforce and, through sub-contracting mechanisms, to have the actual production of its goods take place in Asian sweatshops. Although labour costs represents a minimal proportion of its total costs, every penny saved in the production of its goods means a penny added to profits and more importantly improves the company’s attractiveness for future investment.

In capitalism such decisions are inevitable because profit is more important than people’s welfare. Decisions must be taken without regard for the social consequences or for patriotism, which amounts to a misguided notion that as a British registered company Burberry should have some allegiance to the country where it was established or where many of its employees live. The fact that Wales already suffers dire poverty and that comparable jobs will be virtually impossible to find is of no consequence on the balance sheet, where the only consideration can be the bottom line. Companies have but one goal – the maximisation of profits for their shareholders.

The proposed Burberry closure shows how the interests of wage and salary earners are everywhere diametrically opposed to the interests of the owners of the means of production. But it also shows something about capitalist politicians. The politicians do not condemn Burberry for exploiting the workforce that is the source of the company’s rising profits. Nor do they condemn a system that brings prosperity to the few by perpetuating the poverty and insecurity of the many, by reducing wage and salary earners to conditions not much better than slavery, and whose very wellbeing is dependent on how successfully they can be exploited. Legally binding ‘corporate social responsibility’ that would restrict a company’s ‘flexibility’ will not be allowed to happen because this would effect capital accumulation and lead directly to a migration of capital to other less restrictive and more profitable parts of the world.

The experiences of the Burberry workers have happened time and again in the past and will be repeated time and again in the future, for as long as the working class believes that there is no alternative to the capitalist economic system. Working people everywhere would do well to reflect on the fact that capitalism cannot operate in any other way and is incapable of being reformed to do so.

Steve Trott

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