The Turkish lira has depreciated significantly over the past decade. For UK brands buying from Turkey, understanding how currency risk flows through your supply chain — and how to manage it — is a practical commercial necessity.
Turkish knitwear factories operate in a dual-currency environment. Their local costs — labour, energy, rent, domestic yarn — are priced in Turkish lira (TRY). But their input for imported materials (primarily yarn, which is often sourced internationally) and their export pricing are typically denominated in USD or EUR. When you receive a FOB quotation from a Turkish knitwear factory, that quote is almost always in USD — and your exposure is therefore to the USD/GBP rate, not the TRY/GBP rate. Understanding this structure is the first step to managing your currency risk correctly.
Turkish export factories quote in USD or EUR because these are the internationally stable currencies their export industry uses for pricing. The factory converts its TRY-denominated costs (labour, overheads) to USD at the prevailing rate when building its quote. When TRY depreciates sharply against USD, factories face a choice: absorb the cost increase (compressing margin) or raise USD prices. In practice, TRY depreciation often makes Turkish exports cheaper in USD terms initially, before cost inflation catches up. The dynamic can work in UK buyers' favour during TRY depreciation phases, but it is not reliable or predictable.
If you receive a quote of $28.00 FOB per jumper and the USD/GBP rate is 0.79 (i.e. £1 = $1.27), your GBP cost is £22.05 per unit. If GBP weakens to £1 = $1.20 (USD/GBP 0.83) by the time you pay the factory invoice, your GBP cost rises to £23.33 per unit — a 5.8% increase that you did not anticipate at the time of quoting retail prices. On a 500-unit order, this is a £640 unexpected cost. On a 5,000-unit order across a full season, the difference can be tens of thousands of pounds.
The risk window is the period between when you receive a price quote (and commit to a retail price or wholesale price) and when you actually pay the factory invoice. For knitwear from Turkey, this gap is typically 3–5 months: ordering in April for AW delivery in September means your pricing exposure runs April–September. A 5% movement in USD/GBP over that window is well within normal historical ranges. A 10–15% movement is not unusual over a 6-month period during periods of GBP volatility (post-Brexit being the most obvious recent example).
Because invoicing is in USD, TRY movements do not directly appear on your invoice. However, they affect the factory's economics. Rapid TRY depreciation causes domestic Turkish inflation — wages, energy and logistics costs rise in TRY terms, which eventually forces factories to revise USD prices upward to maintain margin. Conversely, a period of relative TRY stability allows factory USD prices to hold steady or even soften if yarn costs ease. Understanding this dynamic explains why Turkish knitwear prices in USD terms can shift materially between seasons without obvious cause from a UK buyer's perspective.
| Strategy | How it works | Suitable for | Downside |
|---|---|---|---|
| Do nothing (spot rate) | Pay at whatever rate applies on invoice date | Very small orders (<£10k); short lead times | Full exposure to GBP/USD movement |
| Forward contract | Lock in today's GBP/USD rate for a future date | Orders >£20k; 3–6 month payment windows | You lose upside if GBP strengthens; some providers require credit check |
| Limit order | Set a target rate; convert automatically when rate hits it | Flexible timing; not committed to a fixed date | Rate may never be hit; leaves some risk open |
| Budget at conservative rate | Build pricing using a rate 5–8% worse than today | All brands; simple; no derivatives needed | Slightly less competitive pricing; upside kept if GBP holds |
| Request GBP or EUR invoice | Ask factory to invoice in GBP or EUR | Possible with some factories; shifts risk to them | Factory prices in a buffer; you may pay slightly more |
For small first orders, the cost of accessing formal currency hedging products (forward contracts, options) often exceeds the risk they protect against. The minimum transaction sizes at most FX providers are £20,000–£50,000; below that, you're dealing in spot markets anyway. The practical solution for small orders is to build a conservative FX rate assumption into your pricing model — if the current rate is £1 = $1.27, build your pricing at £1 = $1.20. This 5.5% buffer absorbs normal rate movements. If GBP holds at the higher rate, the buffer becomes a margin improvement.
For orders above £20,000 in USD-equivalent invoice value, a forward contract from a specialist FX provider (Wise Business, Ebury, OFX, Moneycorp, or your business bank's FX desk) fixes the rate at which you convert GBP to USD on the payment date. You lock in today's rate for the future payment — typically at a small premium over spot, which diminishes as the forward date approaches. The key practical step: agree the forward contract as soon as you confirm the order with the factory, not just before payment is due.
UK knitwear brands buying two seasons (AW and SS) have two separate currency risk windows per year. A simple approach: hedge AW in the spring when you place AW orders, and SS in the autumn when you place SS orders. This creates a predictable FX cost for each season's budget. Avoid trying to time the market — the consensus among SME finance advisors is that time-in-market hedging (locking in rate when you know your exposure) consistently outperforms attempts to pick the best rate moment.
The simplest currency risk reduction is shortening the gap between pricing decisions and payment. If a factory offers 30% deposit on order and 70% on shipment, your full exposure runs from the order date to the shipment date — potentially 4–5 months. If you can negotiate 30-day post-delivery payment terms (standard in some factory relationships), your risk window for the 70% balance is much shorter. Discuss payment terms explicitly when establishing factory relationships — better terms on payment timing have real FX risk benefits that brands often overlook when only negotiating FOB price.
Three practical questions to ask when establishing a new knitwear factory relationship: (1) Do you invoice in USD, EUR or GBP? Most Turkish factories invoice in USD; some will invoice in EUR; few will invoice in GBP. If EUR works better for your business (e.g. you also sell into the EU), request EUR invoicing. (2) How far in advance can you give me a firm quote? A firm quote commits the factory to a price; a "indicative" quote does not. Know what you're working with when pricing your retail range. (3) Can you fix the price for 90 days from order placement? Some factories will lock their USD price for the duration of the production window; others reserve the right to revise if material costs change significantly. Get price validity in writing, particularly for orders placed during periods of significant TRY volatility.
When we quote FOB, the price is fixed from order confirmation to shipment. You know exactly what you'll pay in USD; your remaining exposure is the USD/GBP rate, which you can manage through your own FX approach. We can also discuss EUR invoicing for brands with EUR exposure on the sales side.
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