ECONOMYNEXT – NEXT Manufacturing, a factory owned by UK group said it was closing a factory in the Katunayake industrial zone due to high operating costs, and two other related plants would continue with reduced staff.
“This has been a very difficult decision for the Company and has been taken after exploring all alternative options,” the David Reay, Director said in a statement.
“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.”
The statement did not mention which costs were contributing to the closure, but one of the higher costs were labour, industry analysts said.
If labour costs are too high, no other investor would also be able to take-over and run a such a company and compete against other countries, leaving closure as the only option, they said.
NEXT would pay up to 2.5 million rupees in compensation to each laid off worker, based on their terms of service under Sri Lanka’s labour law.
The full statement is reproduced below:
NEXT Manufacturing Katunayake Production Plant to close
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.
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.
NEXT’s other SRI LANKAN operations to remain open
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 (see table below for numbers involved).
NEXT other Manufacturing operations based in Andigama and Nawgaththegama (NMA 2, NMA 3 and NMA Cutting) will also continue to operate as usual.
For the removal of doubt, our Colombo sourcing office and operations will not be affected by this change.
Manufacturing Redundancies and Ongoing Workforce
Sadly, the closure will result in 1,416 redundancies overall. The table below puts this closure in the context of our other manufacturing operations in Sri Lanka.
We would like to reassure our remaining colleagues that no further redundancies in Sri Lanka are planned or foreseen by NEXT Manufacturing.
Assistance for those affected
NEXT will be working to help those leaving the Company to find alternative local employment. To this end, we will be contacting other local production sites to help find alternative employment opportunities for those affected.
Severance arrangements
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 months pay in addition to their other entitlements.
The table below shows the formula used to calculate the TEWA entitlement depending on the number of years service. The final column shows the proposed additional ex-gratia payment made for each service band.
Please note that TEWA payments are subject to a cap of 2.5m Sri Lankan Rupees.
In addition to the sums detailed in the table above, the following will be paid 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)
4. Payment of all Gratuity
Timing and process
Within the next few days, employees who are leaving will be informed of their situation, given details of the formal exit process and proposed timing of payments.
Finally
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.
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