We’ve heard plenty from UK suppliers about the potential impact of the Brexit vote, but what’s the view from Europe? We ask Mauro Capozzo (pictured), chief executive of flooring and decorative surfaces specialist Swiss Krono, for his take
Q: Can you give us a bit of background on the business and your involvement with UK customers?
A: The first factory in the Swiss Krono Group, situated just outside the town of Lucerne in central Switzerland, started making particleboard in 1967. Today it is the high-tech headquarters of one of the world’s leading producers of wood-based panel products for the furniture and interiors markets. We employ 4,500 people across our plants in Switzerland, France, Germany, Poland, USA, Ukraine, Russia and Hungary and manufacture enough product to fill 2,000 lorries every day. Despite our huge scale of manufacturing, the company still remains a family-owned business with ‘Swissness’ very firmly at its core.
Q: How’s business for you in the UK?
A: Very good. Overall volumes are growing slightly year on year, but naturally our margins have taken a big hit due to the weakened pound. However, our strong brand, quality product and constant innovation have always served us well in times of adversity.
Q: Is IDS your main customer in the UK? Tell us more about that partnership…
A: Our 35-year relationship with IDS is something we are very proud of. IDS has played, and will continue to play, a crucial role in the growth of our business. We make sure that there is always a strong interaction with people from both organisations, old and new, to ensure a complete understanding of how we all work best together. All successful partnerships are built on good communication and shared common goals. We have made sure that, even after 35 years together, we don’t take these basic principles for granted.
Q: Why do you think the Brexit vote went the way it did? Was the argument too heavily weighed towards the immigration issue?
A: I am convinced that immigration was the one single issue that had the most sway in the outcome of the vote. It definitely overshadowed all the other important issues and considerations. These, of course, should have demanded at least equal, if not more detailed, scrutiny but unfortunately seemed to get lost in all the sound bites and simplistic tabloid headlines.
Q: What was your initial reaction to the vote in terms of how it might affect your business? Has that attitude now changed?
A: Naturally, I was disappointed as the only certain outcome of the ‘out’ vote was bound to be the one thing that’s always bad for business – uncertainty. While I continue to remain concerned about what the final exit deal will look like, I’m almost certain that, regardless of what happens between the UK and the other EU member states, nothing will change in the laws governing trade between Switzerland and the UK. If anything our two ‘non-EU’ economies could in fact grow closer.
Q: How has it affected your business so far?
A: Volumes stay steady, but the low pound has affected our margins. We are in the UK market for the long run, so there will be no knee-jerk reactions from our side – we are Swiss after all! We’ve experienced so many ups and downs over the years, and we’ve always maintained our commitment to the UK market.
Q: How has it affected your relationship with IDS?
A: Our relationship with IDS is as strong as ever. In my time, we’ve experienced huge global recessions, massive currency swings and shortages in raw materials. This latest chapter in our history will not divert us from our well-laid plans for continued growth. In fact, if anything, it’s brought us closer together, as during turbulent times nothing can afford to be taken for granted.
Q: What issues and challenges have been raised in terms of how you do business with UK companies?
A: The main issues will remain the same as they were before the vote. Our focus is always on innovation, quality and service. It’s up to Swiss Krono to continually develop new, cutting-edge products and concepts.
Q: And what of the way other EU countries do business with the UK?
A: The main issue for EU member states has to be in the detail of the terms and conditions of the exit package. Fundamentally, free trade – something taken for granted for almost 50 years – needs to be re-established as soon as possible. Without this in place, it will be hard for our mainland European competitors to go firmly to the next step.
Q: Are there reasons to be positive?
A: Yes, of course, there are many. The UK economy has been performing really well in recent years, creating a very vibrant marketplace with huge demand for quality products. Well-organised businesses, with a clear vision and strategy, will continue to find success in the UK. Low interest rates are supporting borrowers and there is generally more disposable income in flux. Our quality products are in demand and it’s our responsibility to make them as widely available as possible through our exclusive distribution partnership with IDS.
Q: What’s the view of retailers you talk to?
A: As the so called ‘experts’ can’t agree on what the vote really means for the UK economy, I think it’s understandable when I answer this question a little quizzically! Depending on the day, the weather or the latest scare story in the media, retailers seem to vary from being extremely upbeat and positive, to worried and concerned as to what tomorrow might bring. In reality, most seem to be very stable in their sales figures and, despite what was alluded to in the press, the world didn’t end on June 24.
Q: Is the UK in danger of being cast adrift or is it too big an economy and too lucrative a market to ignore?
A: There’s a genuine reason to be concerned about how the EU and other foreign countries view future trading with the UK. I remember very well the effect on the economy on the French-speaking part of Canada when it looked as if it might vote to go independent. Just the threat stopped many US and other foreign businesses investing in this region. Its economy has never fully recovered. Falling revenue led to raising taxes, and it’s a circle that it has never managed to break.
However, the UK has a large and robust economy, and with its buying and spending power, potentially has the tools to keep other countries interested in trading and investing in the UK.
Q: How do you see things playing out? Will the UK be able to negotiate a deal whereby we have access to the single market but are still able to restrict movement of labour?
A: That’s the big question, of course. The simple answer is no, there will have to be compromise on both sides. My biggest fear for the UK is that the EU will want to make an example of what happens if other member states try to leave, and make the negotiations as complicated and difficult as possible. This will extend the period of uncertainty, which could be very damaging to the overall economy in both Europe and the UK.
Q: What’s your view on the capabilities of Teresa May and foreign secretary Boris Johnson?
A: I think with Teresa May leading the negotiations, the UK stands an excellent chance of getting the best deal possible. Maybe Boris can carry her bag.
Q: How has the rest of the European kitchen trade reacted to the news? Is there a consistent view on how the situation will play out or is opinion divided?
A: With a weakened pound, sales to the UK have become less interesting to the lower-end producers, but I believe that European or foreign-based companies like ourselves, positioned for the long term in the UK market, with good-quality products and strong brands, will not be too concerned at the medium- and long-term situation.
I think it’s hard for most mainland Europeans to follow the logic of the UK leaving the world’s largest trading bloc. It’s been suggested that Europe will suffer more than Britain if it chooses to erect trade barriers. Any form of trade barriers will undoubtedly affect both the UK and Europe. It will be a classic ‘lose/lose’ scenario and is a real step backwards.
Q: International trade secretary Liam Fox said recently that Brexit was a ‘glorious opportunity’ to abandon full membership of the single market, so it can bring in curbs on the free movement of immigrants. Do you agree?
A: I can’t see the EU abandoning one of its core principles of freedom of movement, just to accommodate the UK. Any barriers to UK entry of EU citizens will undoubtedly be followed with some kind of attempted penalty. The question is, of course, what and how?
Q: What do you think of his intention to make the UK a full independent member of the World Trade Organisation?
A: The UK must now both politically and economically stand on its own two feet. The WTO is just one negotiation the UK needs to carry out for itself and there are numerous others that must follow quickly afterwards.
Q: Is the UK likely to ‘maximise access to the single market while retaining the ability to make free trade deals’. Is that realistic?
A: Where possible, our negotiators need to keep the two things separate. There is no hard and fast rule to say that if we trade with one country or trade bloc, then we will trade less with another. But the EU must always have an eye on not setting a precedent that others are keen to follow.
Q: Do critics of free trade need to learn lessons from the failures of other economic models, such as communism?
A: Capitalism, free trade and, loosely speaking, ‘western democracies’ are far from perfect, but in recent history they seem to be the only basis on which countries have been able to maintain and sustain long-term peace and economic growth.
Had the UK stuck to what its people actually voted for in 1974, which was purely an economic union with their main European neighbours, it might not be in this position now.
The idea of social and political union was purely an invention of the politicians, and it was forced, without consultation, on the British public and could explain why the EU as it exists today has now been rejected in its entirety by these same people.
I hope that, whatever the outcome of Brexit, we never let the underlying reason for the union of European countries get forgotten. If nothing else, this union has brought 70 years of peace in western Europe and I hope future generations never take this for granted.