Flooring distributors weigh in on Brexit
We asked flooring distributors for their views on Brexit and how it has affected their businesses. Here are their responses.
Going forward, the outlook for Floorstock and the overall flooring market is optimistic, and my team and I are pleased to be in a strong position with uncertain times ahead regarding Europe and the Brexit situation.
We’ve certainly noticed a change in the flooring industry and much more caution in consumer spending particularly with high street chains. No doubt the uncertainty affecting Brexit negotiations will affect all businesses but hopefully will be temporary rather than permanent in the following years.
Speaking to our suppliers the general consensus is that things have slowed down across all market sectors, but whether this can be directly blamed on Brexit is hard to say. All we can do is ensure we manage our business accordingly and hopefully we can maintain our strong position within the industry, whatever may happen.
Tom Case, managing director
Timba Floor is the UK distribution arm of the SWI group, the Dutch-based flooring manufacturer with four production units based in Europe and Asia. Unfortunately, like all UK importers, Timba Floor has felt the challenges and financial strains following Brexit.
The EU referendum vote has subsequently played a significant role in the planning of the company’s future and in particular with the need for readdressing of our trade pricing policy on numerous occasions.
During the initial period following the Brexit vote and the subsequent immediate weakening of the GB £ shortly afterwards we faced the challenging decision of managing our forward procurement position and trade pricing to allow for the impact of the close to 20% movement in exchange that was evident at both ends of the operation.
As a company that is 95% reliant on importing our goods, it was a problem whether we were purchasing in US dollars or euros. This instantly changed the distribution market position as all industry competitors had to make necessary directional decisions, some reacting quicker than others, without a clear indication of the global position going forward.
Initially, this was about finding our feet again in what was emerging as a new playing field. We had three main challenges to deal with.
The impact to company sales if we immediately followed the currency movement and increased selling rates to clients, (which, as nobody could predict the period of a weakened sterling ahead) came with a high risk.
If we didn’t increase selling prices, then careful planning was required in managing our company inventory, with both stock on hand and future orders requiring careful monitoring. As a direct result of the weakened strength of the GBP in real terms, we were only able to buy 80% of the stock to replace items sold during this period with the same GBP revenue received from the sales channel.
How we would plan volumes in an uncertain marketplace and renegotiate with our supply chain to support our clients when we had no volume indicators or timeline to work with as to when or if regular trading patterns would return.
However, in the face of such uncertainties we concluded the best route was to trust in our overall long-term strategy as a manufacturer and distributor and allow time for the market to settle down again with minor but regular adjustments in our trade offering.
In the two years since the Brexit vote, we’ve seen some very noticeable changes in purchasing patterns and have a much better understanding of how price sensitive the market is. As a result, we’re now witnessing definite growth trends in both laminate, synthetic type floors and the lower priced engineered wood floors that are targeted at consumer affordability.
Although the premium end is a little slower, it is maintaining a reasonable level whereas the middle ground is the most affected by the results of Brexit. This we feel is a direct consequence of the end-user working to a budget and trading down to fit within the end consumer’s pricing bracket.
The other main area of concern we’re closely following since the vote is the weakening of the high-street trading, with retailers looking more and more to increase online traffic to replace the drop-in footfall. With this comes a very noticeable move by retailers to improve service levels and to reduce stock holdings.
The impact on this for a distributor is that we see much smaller than average stock movements with higher associated costs in the supply chain. However, the retailer is in general happier to take this on board than invest in higher risk stock holdings.
Even though we see a gradual improvement in the GBP exchange rate in the financial market, we don’t see an upturn in consumer confidence to purchase or indication of real market recovery now and don’t see any short-term change until the Brexit unravels fully.
Alan Muxworthy, managing director
I’m cautiously optimistic! It’s something we’ve talked about for a long time, but I must say I’m not as worried as I was at first. I’m more concerned about the uncertainty it’s caused in the market as a whole which has clearly impacted the construction industry in the past few years.
We’re looking forward to capitalising on the export opportunities it will create and already is creating for us. I’m confident government will negotiate the best deal for the country and the market will recover stronger than before. As Winston Churchill said: ‘We fight best when our backs are against the wall’.
Gavin Whiley, managing director
In relation to Brexit, this has had an effect already on currency fluctuations and price increases causing instability and we are only too aware in recent times how negative publishing in the media can have a detrimental effect on the economy. Ireland is now again portrayed in the media as a booming economy which does not reflect the reality on the ground. We’re all in the dark as to what will transpire with the border which is our biggest concern as product is moved either way on a daily basis. Hopefully we will know sooner rather than later.
Sean Haugh, managing director