On May 19th, a worker was having tea with his friends at a shop near their factory. They all worked at a factory in Sri Lanka owned by the UK-based apparel giant NEXT. Normally, the workday would have continued until 7 pm. However, that day, the supervisors insisted that the workers leave early by 5 pm after completing their production  targets. At around 7:30 pm, the work received a message on WhatsApp from the factory’s human resources department informing him of the factory closure.

“We seldom receive work-related messages from HR”, he highlighted. The notice, sent by the Director of NEXT manufacturing, referenced the increasingly high ‘operating cost’ of the Katunayake Manufacturing Plant as the reason behind the closure. According to the note, there was no prospect of making the factory economically viable.

NEXT operates two additional factories in Sri Lanka, located in Andigama and Nawagaththegama, known as NMA 2 and NMA 3. Of the total workforce of 2,825, the closure of the Katunayake factory (NMA 1) would result in 1,416 workers losing their jobs.

The factory managers and supervisors had begun collecting the WhatsApp numbers of the workers several weeks before the closure. “They said the numbers were being collected to send New Year wishes”, said one of the workers in the factory.

In 2024, NEXT announced a profit of a staggering £ 1 billion, making it the 4th company in the UK to achieve the feat. “The productivity excuse is not something we can agree on,” argued Anton Marcus, Joint Secretary of the Free Trade Zones & General Services Employees Union in Sri Lanka.

The factory closure sparked outrage.  Owing to the decline in demand, the economic crisis and the pandemic, factory closures have regularly affected the garment sector. In 2022, two factories in Koggala closed, resulting in around 1,500 job losses. Similarly, due to decreased orders, about 10 factories, impacting roughly 5,000 workers, closed in 2023. 

The garment sector is one of the key sectors in Sri Lanka, providing direct employment to 350,000 to 400,000 workers. In 2024, the apparel sector generated a revenue of $4.7 billion, marking a 5% growth. However, when compared to the benchmark year of 2019, it had a shortfall of 10.3%. With the country seeking to emerge from a devastating economic crisis and the lasting impacts of the pandemic, such closures would deter economic recovery.

The closure of the NEXT manufacturing unit has also led a political tug-of-war. The opposition parties asked the government to take responsibility for the closure. Questions are being raised about the ‘failure’ of the current government. The government claimed that no prior notice was provided to the Board of Investment or the Labour Department before the closure. In Sri Lanka, permission must be obtained from the Labour Commissioner for the termination of employees, and benefits must be granted in accordance with the TEWA Act. On May 23rd, it was reported that the Labour Department would investigate the factory closure.

The NEXT NML Factory in Katunayake is the only factory in the apparel sector in Sri Lanka with an organised union and a collective bargaining agreement (CBA). As factories are located in enclosed free trade zones, organising is extremely difficult. The presence of trade unions is rare, and CBA is almost non-existent.

The union at the NEXT NML Factory in Katunayake was formed in 2021, when the factory refused to provide bonuses citing the pandemic as the reason. Workers’ action to oppose the non-payment of bonuses led to the formation of a union at the factory, and a CBA was negotiated between the union and management.

“The unilateral closure of the factory has also violated article 3.4 of the CBA agreement,” highlights one of the union leaders. Anton Marcus pointed out that “the union was invited by the factory management for a meeting on May 19th, at 5 pm. However, the management met with the union at 5.30 pm after they had already sealed the factory at 5 pm”. The union strongly opposed the factory’s arbitrary closure.

By NEXT’s own admission, their decision was motivated by cost consideration, “the salary and benefit costs in our Katunayake Factory are around 19% higher than basic wages in our other production units in Andigama and Nawaththegama.” This, however, misses an important context. These improved conditions have been the result of a long-standing struggle by the trade union, as minimum wages in Sri Lanka are so low that they are often insufficient to sustain a family.

A worker elucidates it brilliantly, “These are not benefits but rights, and they enable us to work better. For instance, if they were not to provide transportation, it would never be possible for us to start the factory shift at 8 am.”

“We want the factory to reopen so that we can continue working”, said another worker. However, many are contemplating taking the package, albeit hesitantly. Not because they do not need employment but because they are ‘certain’ that they will not find the necessary public support to push back, which already sees trade unions as a problem. Their fears are not unfounded. Representatives of the employers association spread the view that the ‘disproportionate labour costs’ is the reason behind the closure. Taking a cue from this, articles discrediting unions and their leaders are already being published in the media.

NEXT has pointed to a severance package, along with support to help laid-off workers find alternative employment in other factories. However, workers tell a different story. The termination package offered is being used as a preventive measure to ensure that workers do not take legal recourse. “Some of us visited other factories to seek employment but were categorically told that NEXT employees would not get jobs,” said one worker. This is because employers are scared of a unionised workforce.

June 10th will be the last day for full payment; after this date, wages will revert to basic pay. A worker asks a pertinent question, “the severance package is not millions; what will we do after it runs out? Where will we find jobs?” The majority of the workers are internal migrants and the sole breadwinners for their families. 

Sri Lanka now faces a 44% trade tariff imposed by the Trump administration. The garment sector is bracing itself for a storm. Unions in Sri Lanka have come together and formed alliances to discuss the impact and prepare itself. The government must include the voices of workers and unions, to ensure that the impacts of such closures and tariffs on workers can be minimised and an economic recovery that do not leave workers behind can be brought forth.