Retailers plan for worst-case Brexit

Kbb retailers have revealed the preparations they are making for a worst-case Brexit scenario as the UK prime minister says it is “absolutely right” to plan for a “no-deal”, while others opt for a wait-and-see approach.

Theresa May’s comments came as she visits Africa for the first time as prime minister in an effort to strengthen economic ties with key partners outside the European Union ahead of the UK’s scheduled departure on 29 March next year.

As she acknowledged in a BBC interview from South Africa that nobody knows what the outcome of the negotiations will be, UK kitchen and bathroom retailers revealed their plans for a “doomsday” scenario of a hard or “no deal” Brexit.

Bathroom retailer CP Hart, which has 14 showrooms in the UK excluding those it now owns as a result of its purchase of European Bathrooms earlier this year, told kbbreview it was in talks to line up additional finance as a safety buffer “in case the unthinkable ‘no deal’ becomes reality”.

CP Hart chairman Richard Reynolds said: “Every retailer and supplier that we know is concerned by the lack of clarity that characterises the Brexit negotiations and by the UK government’s seeming indifference to business’ concerns.

“I call on UK MDs of our industry’s major European brands to put the issue of Brexit at the top of their agendas. They must look to find solutions to the potential chaos and communicate these clearly to the market.”

Derek Miller, co-owner of Scope Bathrooms in Glasgow

“Customers are deferring purchase decisions and companies are deferring investment. That allied to the brake on the top end of the housing market caused by stamp duty hikes, and the government-imposed cost increases such as rates, minimum wage hikes, pensions and the apprenticeship levy are putting some company balance sheets under pressure.”

He said that having access to additional finance was “as close as we can come to a contingency plan”, but added: “It’s very hard to plan if you do not know what eventuality you are planning for.”

Meanwhile, Belfast kbb retailer Robinson Interiors, which sells Rational kitchens and claims to be the biggest built-in BSH dealer in Northern Ireland (NI), said it had “reached out” to a number of British manufacturers with the aim of being able to quickly substitute its Italian and German kitchen ranges with comparable homemade lines in the case of the Brexit disaster that Derek Miller, co-owner of Glasgow-based Scope Bathrooms, has warned about in the September issue of kbbreview.

Muswell Hill showroom
CP Hart bought European Bathrooms earlier this year

Miller believes a no-deal will lead to a meltdown in trade between the UK and the EU, with European goods unable to pass through into the UK until some sort of intervention by the World Trade Organisation, after which time goods would start to “trickle through” with tariffs applied.

Spanish surface specialist Neolith opened a new warehouse in Essex earlier this year partly, it said, to bring its business closer to its UK customers and limit the fallout of any potential disruption to UK-EU trade. Nobilia GB will also open a new UK distribution centre – the company’s first – in September. It will hold £1 million worth of stock.

“As a responsible business, we are scrutinising our inbound supply processes to ensure that we have best practices and certifications in place to ensure a compliant, secure and transparent supply chain for customs purposes.” 

Neil Clark, UK managing director, Franke

Mark Robinson, one of the partners at Robinson Interiors, which has been in business for more than 40 years, said his son was a constitutional lawyer in Brussels and has warned that the luxury goods market could see tariffs of 40% in a worst-case scenario.

“A hard Brexit could kill off the German kitchens market, and I can’t see that happening,” he said. “After the vote back in 2016, Merkel [Chancellor AngeIa Merkel] was immediately summoned to a meeting by the German car industry, and they are even more powerful than the German kitchen market.

“I’m hoping that once all the dust is settled, nothing much will actually change.

“I don’t think that is an unrealistic hope. But still, I’m trying to be proactive, because we just don’t know, and all our investment in the showroom and in growing our designers is on hold until we get more detail.

“The irony is that the German kitchen business in Northern Ireland in the middle-to-top end is quite strong at the moment – possibly because house prices are steady and homeowners are feeling reasonably confident that they will remain strong.”

Mark Robinson, partner, Robinson Interiors, Belfast
“Frictionless Irish border deal is key” Mark Robinson, partner, Robinson Interiors, Belfast

Apart from tariffs, and the potential supply chain disruption that could ensue from a messy breakup, Robinson is also faced with the concern over how the Irish border challenge is resolved, with more than a fifth of his business coming from Republic of Ireland and growing.

Robinson attributes the demand to the fall in the pound versus the euro since the vote, which has made kitchens up north cheaper as Dublin’s economy has boomed.

“We don’t believe there will be a hard border. That would be catastrophic,” Robinson told kbbreview.

“We are not going back to restrictive customs controls of the 1970s and 1980s. There are tried and tested mechanisms, for example, those used between Norway and Sweden and Germany, Italy and Switzerland. But it is critical that whatever mechanism is used maintains the fluidity of north-south trade.”

Like other UK kbb retailers, Robinson said that just seven months away from Britain’s departure date his firm was in the dark over suppliers’ Brexit plans, or whether indeed they had any at all.

“I’ve no doubt they have a plan a, b and c depending on the scenario but they’re not divulging them to us,” he said. “They just give a nervous laugh when the subject is brought up and ask if we know something that they don’t!”

Trevor Scott
Trevor Scott, MD, Rugby Fitted Kitchens: “Price rises have eroded margins.”

Rugby Fitted Kitchens and Anglia Interiors, which has showrooms in Bedford and Huntingdon, separately confirmed that their suppliers had been equally quiet, while CP Hart’s Reynolds said that he has had conversations with suppliers about what would happen if there was a sterling crisis and whether retailers should build up additional stock in advance but that these have fallen short of action.

Scott said there had been no clarity from any of his foreign suppliers about whether they had contingency plans, and suggested that longer lead times for German kitchen manufacturers could exacerbate the production challenges they are already facing as a result of the collapse of Alno earlier this year.

Like other retailers, including Concept Interiors in Sheffield and Interiors of Harrogate, which saw Häcker sales up 50% over the first three months of the year and Siemens sales up 60%, Scott said that uncertainty over the nature of the final Brexit deal hasn’t dented consumer confidence at all.

“In fact, the British public hasn’t seemed to bat an eyelid,” he said, but admitted that price rises, in some cases up to 20%, as a result of exchange rate fluctuations, had eroded margin.

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