- UK trade rule change allows SL to use global fabrics from 2026
The United Kingdom will liberalise rules of origin for apparel exports under its Developing Countries Trading Scheme (DCTS) from early 2026, a policy change that is expected to remove long-standing sourcing constraints for Sri Lankan garment manufacturers and improve their competitiveness in one of their most important export markets.
Sri Lanka is among 65 developing countries covered under the DCTS, which was introduced by the UK Government in June 2023 following its exit from the European Union (EU). The scheme provides preferential access to the UK market, with more than 92% of Sri Lanka’s product lines qualifying for duty-free entry, according to the Sri Lanka Export Development Board (EDB).
Under the revised framework, Sri Lankan apparel manufacturers will be allowed to source up to 100% of their raw materials from any country worldwide while continuing to enjoy zero-tariff access when exporting garments to the UK. The change takes effect from January 2026.
Trade officials and industry representatives say the reform directly addresses one of the most restrictive elements of the post-Brexit trade regime inherited from the EU’s Generalised Scheme of Preferences Plus (GSP+) system.
How the rules previously constrained exporters
When the UK rolled out the DCTS, it largely retained the EU’s rules of origin requirements, including conditions related to regional cumulation. For Sri Lankan apparel exporters, this meant that duty-free access depended on sourcing fabrics mainly from countries within the South Asian Association for Regional Cooperation (SAARC) group.
That framework had become increasingly misaligned with global apparel supply chains, particularly as demand in key markets shifted towards synthetic and blended textiles.
Apparel, Textile, and Related Industries Sector Advisory Committee Chairman Hemantha Perera said that the earlier rules limited the types of products Sri Lanka could competitively supply to the UK.
“Earlier, we were eligible for duty-free access, but only if we used fabric sourced from SAARC countries,” Perera said. “The problem is that synthetic fabric production in those countries is very limited. Most synthetic fabrics come from China, Vietnam, and Indonesia.”
As a result, Sri Lankan exporters were largely confined to cotton-based products when supplying the UK market, even as demand increasingly shifted towards synthetic apparel categories such as athleisure and performance wear.
“Now they allow us to use synthetic fabric sourced from countries like China and still qualify for the DCTS facility,” Perera said. “That opens a new avenue for Sri Lanka because the UK market today is very different from what it was before.”
What changes under the revised DCTS
According to information released by the EDB, the revised DCTS removes restrictions on global sourcing of inputs for apparel exports and simplifies processing requirements.
Under the new rules, manufacturers are no longer required to ensure that two substantial manufacturing processes take place in Sri Lanka to qualify for preferential access. Trade officials say this is expected to reduce compliance costs and improve ease of doing business for exporters.
The revised framework also expands access to regional cumulation beyond SAARC. Inputs sourced from the Asia Regional Cumulation Group, comprising 18 countries, will be treated as originating in Sri Lanka for the purpose of accessing DCTS preferences. This provision applies across sectors and is not limited to apparel.
“These reforms give Sri Lanka significantly greater supply chain flexibility,” the EDB said in a statement. “They enhance cost efficiency and production competitiveness, particularly for export sectors that rely on globally integrated supply chains.”
Why the UK market matters
The UK is currently Sri Lanka’s second-largest export destination, according to official trade data. Apparel exports to the UK were valued at approximately $ 670 million in 2024. During the January–November period of 2025, apparel exports amounted to around $ 624 million, reflecting softer global demand conditions.
Overall, apparel products account for nearly 73% of Sri Lanka’s total exports to the UK.
Speaking to The Sunday Morning Business, EDB Chairman Mangala Wijesinghe said that the UK market remained critical for Sri Lanka’s export strategy due to both scale and composition. He added that the size of the UK apparel market offered significant scope for Sri Lankan exporters.
“When you look at the UK market, it is a very large apparel market,” he said. “There is room for Sri Lanka to increase its presence if we are competitive.”
Competitiveness against regional peers
Sri Lankan apparel exporters face intense competition from countries such as Bangladesh, Vietnam, and India, particularly on price. Industry representatives say higher input costs, energy prices, and compliance standards make it difficult for Sri Lanka to compete without preferential access.
Wijesinghe said zero tariffs, combined with the new sourcing flexibility, would help narrow that gap.
“With zero tariffs, our exporters can compete better with other countries supplying the UK,” he said. “Without tariff costs, we can manage pricing more effectively, even though our production costs are higher than some competitors.”
He noted that the same competitive pressures existed in the US market, where Sri Lankan exporters competed with lower-cost producers without tariff preferences.
“In the UK market, this zero-tariff policy gives us an advantage that we don’t have in some other destinations,” Wijesinghe said.
Impact on production and capacity
Industry representatives said that the liberalised rules should not be viewed as a trigger for large-scale expansion of production capacity. Perera said the primary benefit would be improved utilisation of existing capacity rather than rapid growth.
“I don’t think there will be a big expansion in capacity,” he said. “But we can fill existing capacity better with this new system.”
Sri Lanka’s apparel exports peaked at around $ 5.6 billion several years ago. Since then, export earnings have remained below that level, with annual exports closer to $ 5 billion in recent years.
“We haven’t consistently reached that peak again,” Perera said. “This new facility gives us a better chance to get closer to that level, depending on market conditions.”
Sectoral benefits
While apparel is the main beneficiary of the revised rules, the DCTS applies across Sri Lanka’s export basket. Wijesinghe said that the zero-tariff access could support diversification into other sectors over time.
“This is not only for apparel,” he said. “In the future, we can expand exports of other products such as food and beverages. Sri Lankan tea, for example, can be exported to the UK market without any tariffs.”
However, he acknowledged that apparel would continue to dominate exports to the UK in the near term due to scale and established buyer relationships.
Industry response
The Joint Apparel Association Forum Sri Lanka (JAAFSL) welcomed the UK Government’s announcement, describing it as a significant upgrade to existing trade arrangements.
In a statement, the JAAFSL said that the liberalised rules would allow manufacturers to source inputs globally while maintaining tariff-free access, aligning Sri Lanka with countries enjoying comprehensive preferences under the DCTS.
Welcoming the announcement, JAAFSL Secretary General Yohan Lawrence said that this reform was a timely recognition of Sri Lanka’s role as a resilient and responsible sourcing destination, and by removing restrictions on input sourcing, the UK had levelled the playing field for Sri Lankan manufacturers.
The JAAFSL said that the reforms would support competitiveness, improve efficiency, and help secure employment across the apparel value chain.
Employment and economic relevance
The apparel industry is Sri Lanka’s largest export earner and one of its largest private sector employers. According to industry estimates cited by the JAAFSL, the sector directly employs over 350,000 people and supports the livelihoods of more than one million individuals.
Trade officials say maintaining competitiveness in the UK market is therefore critical not only for export earnings but also for employment stability. The EDB said that the revised DCTS rules positioned Sri Lanka to integrate more effectively into UK and global supply chains while supporting export diversification and long-term economic growth.
Bilateral engagement
The EDB also noted that discussions had already taken place between its leadership and the British High Commissioner to Sri Lanka on the trade opportunities arising from the revised DCTS. These discussions had also covered Sri Lanka Expo 2026 and planned brand promotion initiatives in the UK market.
While the liberalised rules of origin will come into force in early 2026, exporters say the advance notice had provided time to plan sourcing strategies and engage with buyers ahead of implementation.
Sri Lanka’s apparel trade with the UK
Sri Lanka’s apparel exports to the UK have shown volatility over the past decade, reflecting global demand cycles, trade policy shifts, and pandemic-related disruptions.
Exports peaked at $ 827.8 million in 2017, before easing to $ 770.9 million in 2018 and $ 784.6 million in 2019. The onset of the Covid-19 pandemic led to a sharp contraction in 2020, with exports falling to $ 591.3 million, including a pronounced collapse in April 2020.
A partial recovery followed in 2021, with exports reaching $ 681.4 million, before rising further to $ 717.1 million in 2022. Momentum weakened again in 2023, with exports declining to $ 626.7 million, reflecting softer global apparel demand.
In 2024, exports stood at $ 674.7 million, showing modest recovery. For 2025, exports totalled $ 624.5 million based on January–November data, indicating another year of subdued performance amid continued pressure on global apparel markets.