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E-Commerce Retailer ASOS to Double UK Manufacturing on Weak Pound

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Brexit may have roiled markets and left UK citizens wondering what’s going on, but for online retailer Asos, the European Union secession means growth for the business.

Picking up on the pound’s 15 percent post-Brexit plunge, the fashion purveyor has plans to double its manufacturing in the UK while its more affordable to do it.

Asos will open more manufacturing plants in Britain over the next three to four years as part of its expansion plans. The company also expects to add 1,500 more employees to its head office in London over the next several years.

“There is manufacturing capacity in the U.K. but the skills aren’t quite as available as they once were,” the company’s CEO Nick Beighton told Bloomberg.

Asos alluded to expansion plans when it released its financials in October. The company said in October that sales soared in all of its markets last year, and its revenues went up 26 percent in the fiscal year ended Aug. 31. Sales in the States grew 50 percent and the U.K. saw a 27 percent boost.

As such, Asos said at the time that it would design a supply chain to underpin its growth stateside, though no detailed plans were disclosed.

The company now says moving more manufacturing to the UK will mean getting goods to consumers even more quickly, since 70 percent of its annual sales are in Europe. Asos sells a combination of its own brands, which account for 45 percent of its sales, and other big-name fashion brands.

With 57 percent of its sales outside of the U.K., however, Asos has benefitted big from the pound’s decline, as it’s been able to cut prices to draw international shoppers and because it’s been easier to invest, Beighton told Bloomberg.

The closer-to-market model would somewhat mimic what Zara has done, manufacturing more than half of its merchandise in Spain where it’s based, and Morocco and Portugal, and being able to get new goods to stores in as little as two weeks.

Analysts appear to have mixed feelings about the success of the move for Asos as on the one hand, it could benefit from producing more right in the U.K. and being able to save on time and costs, while on the other, the lack of skilled manufacturing labor and the requisite skills and infrastructure aren’t at all what they used to be in the country.

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