The owner of Rugby Fitted Kitchens, Trevor Scott, looks at the impact of Brexit on choosing your suppliers
Last June, the UK voted by a narrow margin to leave the EU. This came as a surprise both to those who campaigned to remain, and to those who, like myself, voted to leave.
Everyone said we should make the most of it and most believed that, if we negotiate hard, it’ll all be fine.
Of course, no one could have predicted Cameron’s leaving would result in a power vacuum within the Conservative party, which Theresa May has signally failed to fill. This was compounded by her mad decision to call a snap election, which has resulted in the Conservatives losing their mandate.
Europe has seen this as an opportunity to drive a hard bargain. Hardly any proposal made by our Brexit negotiators has resulted in a favourable outcome.
The result? Sterling is in freefall against the euro and not faring much better against the dollar. Confidence in the UK’s governance is at a low ebb. At least UK manufacturers relying on the export market are happy. But for how much longer?
Even full-blown manufacturing industries rely on imports of raw materials to create their finished goods. Although most of the margin is in that added value, it’s bound to have an impact on margins.
But what about the rest of us who import most of our products either directly, as complete kitchens, or indirectly from Europe-based appliances and component suppliers?
We have all experienced many price increases from suppliers who price in sterling, as they have adjusted to the new norm – and it’s been pretty much across the board.
At the beginning of this financial year, I predicted that if we at RFK didn’t grow our turnover by 20%, just to allow for price increases, then we would have slipped backwards.
Well, we have grown this year, but it won’t end up as 20%. And so, maintaining margin is more important than ever.
Furniture continues to be the kitchen industry’s last bastion of margin as, for some time now, appliances have been sold almost as loss-leaders. Even high-end solid surfaces have seen their margins eroded, thanks to competition from specialist work surface-only retailers carving up the market.
So, working with the right furniture manufacturer is ultimately the single most important business decision retailers need to make.
So, who to go with? European or UK? Once outside the London bubble, most of us this will be having this conversation mainly with German manufacturers, but in some quarters, they’re currently suffering. With excess capacity and insufficient demand, many of the smaller ones are struggling to make a profit, so care needs to be taken in selecting the hands you are going to entrust with your future business prosperity.
Buying in euros will now, more than ever, be a major consideration.
This has opened the door for emerging brands like Masterclass and Kesseler, who appear to be going from strength to strength.
Certainly, dealing with UK brands will give a retailer that ‘Made in the UK’ kudos. Especially since the Brexit vote, this could turn out to be an important and possibly deciding factor in the minds of some British consumers.
At RFK, we always have split our sourcing between British and German suppliers and I can’t see this changing, but we’re certainly keeping our options open.