In 2026, it was reported that hundreds of factories in Bangladesh, mostly in the garment sector, have shut down or reduced capacity, resulting in thousands of workers losing their jobs. An analysis shows that at least 20,000 workers lost their jobs through layoffs or retrenchment in the first six months of 2026.

This is reportedly due to a multitude of issues resulting in financial difficulties for factories, including the global economic slowdown, rising production costs and fuel shortages following the war on Iran, and power outages in Bangladesh. Brand purchasing practices have also been linked to factory closures. For example, the closure of five garment factories under Lithe Group in Bangladesh was attributed to multiple issues, including a decline in purchase orders, uncertainty over future orders, and a significant drop in product prices. Lack of orders has been cited by suppliers as a major cause of mass layoffs and factory closures. An analysis found that over 400 factories had shut down permanently between August 2024 and June 2026 across Bangladesh's seven industrial belts, with 86% of closures being attributed to a lack of orders and financial difficulties. Brands are also reportedly unwilling to pay suppliers higher prices despite rising production costs.

Trade unions report that some workers are being laid off due to increased trade union involvement, after a change in the Labour Law simplified the legal process to form a union, and have called for investigations into the reasons behind dismissals.

Factory shutdowns have led to mass protests, as workers from several closed factories have reported not receiving their owed wages or severance.