The United Kingdom's Developing Countries Trading Scheme, which offers tariff-free access, implemented more flexible rules of origin for apparel on January 1, 2026. This change allows Sri Lankan garment manufacturers to source 100 percent of inputs globally while retaining duty-free access to the UK market.
A manufacturer in Colombo described the development as "a very positive advantage for exporters in Sri Lanka." The manufacturer noted that Sri Lanka will now be on par with countries like Bangladesh and Cambodia, which already have comprehensive export benefits.
Yohan Lawrence, Secretary General of the Joint Apparel Association Forum, stated that the reforms removed previous restrictions limiting Sri Lanka's competitiveness. "Sri Lankan manufacturers can now compete equally by accessing global supply chains," Lawrence said. He added that the garment sector accounts for over 60 percent of Sri Lanka's exports to the UK and supports 1 million livelihoods.
British High Commissioner to Sri Lanka, H.E. Andrew Patrick, called the changes an "unprecedented gain" for Sri Lanka's export sector. Patrick said the reforms demonstrate the UK's commitment to creating shared prosperity through trade partnerships. "By simplifying rules of origin, we are supporting Sri Lanka's economic growth by improving market access to the UK and helping to further diversify exports," he stated.
The new rules eliminate the requirement for two substantial manufacturing processes to be carried out in Sri Lanka. Industry analysts estimate this could generate additional sales of $150 million to $180 million this year.
Felix Fernando, chief executive officer and managing director of Omega Line Ltd and deputy chairman of JAAF, said the outlook for 2026 is now more optimistic. "We may not save costs directly, but we expect to attract more orders because it will be cheaper for customers in the UK," Fernando explained.
Joe Jayawardena, country manager of Dewhirst Ltd, observed that the strategic opportunities would "deliver meaningful benefits to British consumers and contribute positively to the Sri Lankan economy." Dewhirst, a British apparel manufacturer with over 146 years of experience, has been sourcing from Sri Lanka for more than two decades.
Mark Surgenor, president of the Council for Business with Britain, said the organization was excited about the reforms' potential to enhance UK-Sri Lanka trade. "The most significant boost is to the garment sector," Surgenor noted, adding that over 90 percent of products are eligible for zero tariffs under the scheme.
Analysts in Sri Lanka have cautioned that this advantage will only materialize if seized and implemented speedily. They warned that delays in negotiations and strengthening buyer relationships could blunt the momentum.
A UK-based buyer told Sourcing Journal that with better ESG credentials and now being cost-competitive, Sri Lanka can become a value leader. The buyer noted Sri Lanka offers shorter shipping times to the UK, greater agility in sampling and development, and a strong communication and planning culture.
The industry has already recorded growth in 2025, with a 5.42 percent increase in apparel exports during the January to November period, reaching $4.57 billion compared to $4.33 billion during the same period in 2024.
As Sri Lanka prepares for the Source Fashion Exhibition in the UK from January 13 to 15, manufacturers express optimism. Having endured severe flooding from Cyclone Ditwah on November 28 and several years of economic crisis, manufacturers say they have their fingers crossed.
Fernando added that "the icing on the cake would be if we can finally negotiate US tariffs down from the current 20 percent to 12 percent." He expressed hope that there is still room to make that happen.