Apparel giant NEXT closes Katunayake production plant

Some of the employees of NEXT’s plant in Katunayake Export Processing Zone

• UK firm cites increasingly high operating cost at Katunayake as the main reason
• Move will lay off 1,416 employees but will be compensated as per Termination of Employment of Workmen (Special Provisions) Act
• Katunayake plant has been unprofitable, and despite considerable efforts company has been unable to make it economically viable and closure was after exploring all alternative options
• Embellishment and product development plants, also based in Katunayake, however will remain operational but with reduced head-count
• NEXT will continue with operations at two of its other plants in Andigama and Nawgaththegama as well as Colombo sourcing office and operations

Longstanding apparel manufacturer and buyer NEXT has announced the closure of its Katunayake production unit with immediate effect citing high operating cost.

The closure will result in 1,416 redundancies overall. Despite shutting down the plant at Katunayake Export Processing Zone, NEXT will continue operations at two of its other plants in Andigama and Nawgaththegama. The embellishment and product development plants, which are also based in the Katunayake Free Trade Zone, will remain operational but with reduced numbers of employees Colombo sourcing office and operations will not be affected too.

NEXT Manufacturing is the leading supplier of high quality knitted and woven wear to parent company, next PLC UK, one of Britain’s high-street fashion retailers. The company has been in Sri Lanka since 1994.

“After much careful consideration, we are very sad to announce the immediate closure of the NEXT Manufacturing Katunayake Production Plant, Sri Lanka. This has been a very difficult decision for the Company and has been taken after exploring all alternative options,” NEXT Manufacturing Director David Reay said in an announcement.

“At the heart of this decision is the increasingly high operating cost of the Katunayake Manufacturing Plant. For some years now, the plant has been unprofitable, and despite our considerable efforts to rectify the situation, we have been unable to make the factory economically viable. Recently, it has become clear that there is no prospect of this changing,” he added.

“We would like to reassure our remaining colleagues that no further redundancies in Sri Lanka are planned or foreseen by NEXT Manufacturing,” Reay assured.

According to him, NEXT will be working to help those leaving the company to find alternative local employment. To this end, NEXT will be contacting other local production sites to help find alternative employment opportunities for those affected.

In recognition of NEXT Manufacturing history in Sri Lanka, the company intends to meaningfully enhance the statutory severance package it will pay to those made redundant, this payment will be subject to an agreement being reached. This means that employees who are made redundant will get a minimum of 2 month’s pay in addition to their other entitlements.

The formula used to calculate the Termination of Employment of Workmen (Special Provisions) Act entitlement depending on the number of years of service. The company has also proposed additional ex-gratia payment made for each service band. The TEWA payments are subject to a cap of Rs. 2.5 million.

In addition NEXT will pay the following to those leaving: 

1. Payment up to the last working day of May 2025, with no need for departing employees to attend between now and the end of May. This will be paid as usual on the due dates; 

2. Payment of all outstanding holiday pay; 

3. Payment of all production and attendance bonus (where applicable); and 

4. Payment of all gratuity

“On a personal note I would like to add that I am very sad that we have had to make this decision after so many years of working with colleagues in Katunayake. I would like to take this opportunity to thank colleagues affected for their service to the Company over the years and wish them well for the future,” Reay said in the statement.