Suppliers call for calm after Brexit price hikes

KBB suppliers have warned against knee-jerk price increases as the Brexit vote continues to send shockwaves through the industry.

In a recent kbbreview poll, 59% of retailers said they’d already been hit with price increases.

However, many suppliers claim they are either holding prices at current levels or delaying a decision until the overall picture becomes clearer.

“Prices will have to go up for anything bought on the dollar and the euro and this applies, for example, to all imported products from places such as China and India, where we have seen prices move up by approximately 13% for goods that have landed in the past few days,” explained John Bagshaw, managing director of Ideal Bathrooms and International Decorative Surfaces.

“This will be less so from Europe, but currency fluctuations will nevertheless be a challenge. We are monitoring what’s happening with the currency closely so that we can make necessary adjustments. With exchange rates against the US dollar at a 31-year low, it’s inevitable that businesses are going to have to pass on these differentials. However, none of these are reasons to panic. We have worked our way through challenging business times before and once the initial ‘shock’ of Brexit is digested, then I really don’t think this will severely impact on customers’ buying decisions for kitchen and bathroom products. In many ways, it’s got to be a great time to start a project before the prices get realigned.”

The biggest reported hike in costs so far has been at bathroom distributor Ultra Finishing, which placed an order surcharge of 10% to cover its costs from July 1.

In a statement to customers, the company admitted it had been left in “uncharted waters” by the vote and been forced to raise prices because the business is run in US dollars.

“The immediate concern is the fall in the value of the pound against the dollar,” the statement read. “We are in uncertain times and nobody can predict how long the financial instability will continue. With this in mind we do not want to make any long-term decisions on pricing.

“It is necessary, therefore, for Ultra to apply a 10% surcharge to cover costs from July 1.”

The company agreed to subsidise half of this charge during July and claimed it would remove the surcharge “if the exchange rate returns to the level it was at prior to the exit vote”.

Bathroom giant Ideal Standard has confirmed it will also raise prices across all categories by 3.5% from October 1.

“We continue to take action to shield our customers from the impact of the depreciation in the value of the pound against the euro and the US dollar, but we have now reached a point where we have no option but to implement a list price increase,” explained media relations manager Jenny Smith. “Our strong UK manufacturing presence has also enabled us to absorb some of the impact and limit the price increase to substantially less than the falls in the value of the pound.

“We understand the challenges every business, including our own, currently faces and are fully committed to finding ways to mitigate the impact of the ongoing economic situation in the UK.”

Meanwhile, bathroom supplier Crosswater has delayed its scheduled August increase to ‘reflect review and plan accordingly’, which one market analyst speculated could mean they will hit retailers with a bigger one later in the year.

However, he said, many of the key European bathroom suppliers have “no plans to increase prices” and suggested “those who depend on China and buy in dollars may actually get the hardest hit earlier than those with German parents”.

Alan Dodds, managing director of Roca Group UK, said: “Should sterling weaken even further against the main currencies then the pressure to increase prices to recover some of the lost margin will be strong.

I guess everyone’s situation is different with regard to profitability before the pound fell. Things like ownership – PLC, private equity or private – timing of annual price list changes etc.

“If companies operate globally and in lots of different currencies they become more used to dealing with extreme currency movements and there can of course be swings and roundabouts. The dollar has strengthened against the pound but then the Chinese currency has devalued – so I’m not sure where that leaves Far East sourcing!”

John Lewis boss Andy Street admitted the weak pound was an issue for the chain, which buys a third of its goods in dollars

“The obvious thing for us is a reduction in the growth in consumer spending, he said. “But has it actually changed behaviour? It’s just far too soon to say.”

“At the moment, this is a political crisis, it’s not an economic crisis. But one could turn into the other if not properly handled.”

Uform chairman Eamon Donnelly agreed that the pound “is sliding like a runaway train and anyone buying from Europe will have no option but to put prices up. It’s just a matter of time depending on their foreign exchange policy.”

Meanwhile, Dave Sanders, director of Blum UK said: “It’s our intention to watch and see what unfolds in the coming months and the effect that this will have on our economy and subsequently our industry. While this is happening we see no reason to change our current pricing policy to the market.”

However, John Sheridan, MD of Sheridan Worksurfaces revealed the company is looking at a price increase of around 5%. “Whatever recovery the pound makes will be reflected in our pricing again and reductions passed straight back to our customers,” he said. “We have some close connections with house builders, and it’s widely accepted that they are thought of as the ‘economic barometer’. The good news here is that their business is still booming.”

Also painting a more positive picture was InHouse MD Wayne Dance. The distributor’s portfolio includes German kitchen brand Schüller, German bathroom brand Pelipal and Italian kitchen brand Aster. Dance admitted that the likely outcome of Brexit would be that “imports would become more expensive”. However, he said “every situation presents an opportunity to turn a negative into a positive”.

“Switzerland is not part of the European Union, but it is the second richest nation in the world, has its own tailored EU deal, adopts some EU rules and successfully trades with the EU. If we are indeed to come out of the European Union, we have this successful blueprint to follow. Let’s just hope we have tough negotiators. I certainly wish I could be around that table!”

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