Europe's ambition to advance a circular economy for textiles is hitting a funding bottleneck. According to analysis by ReHubs and Boston Consulting Group, raising Europe's textile recycling rate to 15% by 2035 will require €8 billion to €11 billion in incremental capital expenditure, processing about 8 million tonnes of textiles annually, of which 2.7 million tonnes could be recycled into new fibers. Currently, the global closed-loop textile recycling rate is less than 1%.

Operations also require funding, with an estimated €5 billion to €6.5 billion in annual operating expenditure needed by 2035. ReHubs Europe CEO Robert van de Kerkhof admitted that there is currently no viable business model, and some recyclers' profitability is "severely negative," necessitating public funding through grants, guarantees, blended finance, and other mechanisms to share risk and leverage private investment.

Investment faces the dual challenges of technology risk and revenue uncertainty. Novel textile recycling facilities may simultaneously face unproven technology at scale, fluctuating feedstock supply, recycled fiber prices that struggle to compete with virgin materials, and a lack of brand purchasing commitments. ReHubs' discussions with banks show that investors focus on technical feasibility and the predictability of future revenue. Brands demand lower prices and mature capacity, while recyclers need predictable demand to secure financing, creating a "chicken-and-egg" dilemma. Long-term offtake commitments may be the key to breaking the deadlock.

Circ integrates brand demand through its "Fiber Club," with brands already participating in jointly setting specifications and committing volumes, though specific conversion results have not been disclosed. Circ has also signed purchase agreements with Shenghong Chemical Fiber New Materials and Aigreen Ecological Materials, establishing a sales network for recycled materials. Meanwhile, Circ is preparing a commercial-scale recycling facility in France.

Failed cases serve as a warning. Swedish recycler Renewcell went bankrupt in 2024 due to poor sales, later relaunching under the Circulose brand. The new business model shifts some scaling costs to brands, with M&S becoming its first UK partner, paying a licensing fee to support technology scaling and committing to use the material in its Fall/Winter 2027 collection. H&M Group has also committed to significant purchases of Circulose.

Financing experts point out that prepayment can reduce financing needs, while long-term offtake agreements are more conducive to improving borrowing capacity. Industry players are calling for stricter long-term contracts at the brand level. The revised EU Waste Framework Directive requires extended producer responsibility (EPR) systems, with brands needing to pay for textile collection and recycling, which is expected to improve funding sources, though actual results depend on national implementation details. Van de Kerkhof said that substantial EPR funding in Europe may not flow until 2028-2030, with a "pre-EPR valley of death" in the interim.

Players believe that textile recycling must operate as a unified European market rather than 27 isolated systems, otherwise infrastructure financing could become difficult. Beyond funding, the industry needs to simultaneously address simplifying garment design for recycling and sorting. Industry players are calling for the fashion industry to learn from the power sector's power purchase agreement culture and establish long-term procurement practices. For textile recycling to reach industrial scale, brands may need to move from commitments to actually funding plant construction.

Source: Textile Recycling Needs Billions. Investors Want Guarantees. · Originally published 2026-08-28