Executive Summary

In addition to looking at the UK market for suitcases, handbags, satchels and business cases, including briefcases, document folders and attache cases, this Key Note report also includes miscellaneous small leather goods, such as wallets, purses, credit card holders and cheque book holders. Luggage and bags of synthetic materials, of wicker, tapestry and other fabrics are also included.

The UK's leather industry continues to experience problems with prices of raw materials escalating, with increases in the year-on-year price of skins as high as 80% during the first 6 months of 1996. The bovine spongiform encephalopathy (BSE) crisis may have led to a temporary increase in cattle hides, but the overall trend is one of a worldwide shortage. Added to this, new hygiene and environmental legislation demands processing improvements which, in many cases, margins will be unable to sustain.

Recent surveys indicate that nearly half of the UK's leather companies are suffering financial problems and that poor performance is not limited to small companies. 36% of companies in the leather sector, with turnovers in excess of £11m, are said to be financially weak.

Overseas trade in raw materials and finished goods has declined and the UK leather industry forms a small part, around 5%, of the European Union (EU) industry, dwarfed by Italy's contribution of nearly 60%.

The structure of the global market, too, is undergoing rapid change, with Asia now tanning half of all the leather produced in the world, much of the expansion being at the expense of the tanning industries of western Europe. Asia is also responsible for a rapidly increasing proportion of the world's production of finished leather goods.

The UK leather industry fared badly in the recession, the majority of products being non-essential. Market share of synthetic products is increasing as their quality and finish improve, but purchase prices remain lower than that of real leather so that the value of the market does not rise proportionately. However, a healthier economy and increased optimism and confidence is fuelling consumer spending on a level unprecedented this decade, with purchases of non-essential items, for the first time or as replacements, being made. Tourism within the UK and abroad is thriving, thus offering potential growth in the purchase of luggage. It is thought that unexpected windfalls from building society conversions will, in many cases, be used for additional holidays.

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