A series of plane strain compression experiments and finite element method (FEM) calculations were performed on continuous fibre composites to examine the role of volume fraction and fibre arrangement on the mechanical behaviour when the fibre axis was perpendicular to the loading direction. The flow pattern in the matrix was quantified by measuring the shape change of a fine gold grid which had been fabricated on the surface of the sample prior to deformation. It was determined that the pattern of deformation in the matrix was controlled by the spacing and geometric arrangement of the fibres. The damage process (i.e. by fibre cracking or interfacial decohesion) can be understood by the local distribution of stresses (as calculated by FEM) in the fibres and at the fibre matrix interface. The development of the deformation texture in the matrix and the observations of the pattern of subsequent recrystallization events can be related to the flow pattern in the matrix. The combination of careful experiments with finite element method calculations represents a powerful approach to studying problems involving composite materials.