As the March 29th deadline for Brexit approaches, bed industry specialist reporter Jan Turner asks a cross section of bed industry leaders about their hopes, fears and preparations for the nation’s imminent launch into what is predicted to become a more global trading era …
As Britain prepares to leave Europe, only one thing is certain – with so much still to be clarified and negotiated, the future is clouded by uncertainty.
At September’s NBF Bed Show, manufacturers and suppliers alike were universally aware of Theresa May’s much-criticised Chequers Agreement, which has subsequently been rejected by EU negotiators. But few had a clue what it is all about.
So, for the record, these are the main points as presented in the Prime Minister’s online video presentation – the Chequers plan aims to: deliver Brexit; protect jobs; end free movement; have no annual fees to the EU; take the UK out of the common agricultural and fisheries legislation; stop EU legislation becoming UK law; continue shared security; allow us to sign our own deals; create frictionless trade and jobs; and ensure no hard border in Ireland.
This, says the video, will be achieved by having substantially similar legislation and a common rulebook for goods and agriculture with the EU, although it won’t work for financial services.
It works for agriculture because those rules have been in place for over 30 years, and international bodies will continue meeting those rules for EU trade anyway.
The thinking is that established and trusted relationships will facilitate frictionless trade and also enable businesses to export and import goods without border checks. And it is these close relationships that will overcome the Ireland border issue, according to the presentation.
But the ball is now in the EU’s court, and what is strictly non-negotiable is the ending of free movement, leaving the customs union, ending the jurisdiction of the EU over the UK, and ending our annual contributions to the EU. There will also be a clause to allow the EU/UK to review any changing regulations.
Says Theresa May: “We can negotiate a new relationship with the EU that works in our mutual interest. One that honours the referendum result, gives us control of our money, our borders and our laws. The process of withdrawal is complex, and it will require hard work, serious work, and detailed work. The Government has done that work. The White Paper is our plan for the future. It is the way to the stronger and brighter tomorrow that I know awaits the whole United Kingdom.”
Since the plan has been rejected outright, the future of Britain as a trading nation remains in turmoil, and the views of bed industry commentators is likely to reflect the views of the UK’s wider manufacturing sector. Concerns range from our ability to remain competitive on a global stage to preparing for a future that remains as clear as mud.
As Sayeeda (baroness) Warsi of Shire Beds points out: “The biggest challenge for us all at the moment is the sheer uncertainty of what lies ahead, and we simply cannot dismiss the concerns of major national players such as BMW, Airbus and Jaguar Landrover. A good Brexit would be one that preserves British manufacturing interests.
“And if there is going to be a -35% drop in house prices, as the governor of the Bank of England Mark Carney and others predict, then that is bound to have an effect on the furnishings sector. The furniture industry has already started to feel the impact over the last 12 months – a fall in the value of sterling following the vote, the rising cost of imports and an increasingly protectionist approach to trade and tariffs led by the US, is all playing into the increased uncertainty.”
Tony Lisanti, CEO of the Airsprung Group, agrees: “It’s hard to prepare for something of which no-one yet knows the shape or detail.
“Since the referendum everyone has been affected by rising raw material costs - but even more worrying is the impact Brexit could have on the migrant labour force. Without that there could be real and very serious recruitment issues on the factory floor.”
Britain’s ability to remain competitive on a global platform is a concern for Tean Dallaway, financial director of the Airsprung Group: “Companies are being encouraged to think about more global trading after Brexit and to go beyond Europe - but we could all face problems remaining competitive. This is a wider issue than just rising raw material costs as a result of the weakness in sterling following the decision to leave the EU.
“In just the past few years we have seen the introduction of auto-enrolment for pensions, there is talk of extra taxes to raise additional funds promised to the NHS, above inflation, National Minimum Wage increases, and companies with a payroll of more than £3m now having to pay a 0.5% Apprenticeship Levy.
“All these additional cost burdens will make us less competitive than overseas manufacturers, with the result that the market could see a flood of imported products. This in turn could raise real concerns in the bed industry about safety and quality.”
While fluctuating prices have been wreaking havoc on the cost of imported raw materials, they have worked in favour of those with any sizeable export business. Allan Colleran, MD of Duvalay, sits in this camp, and says: “We are not too worried about the future as we already deal with countries outside of Europe. We buy from Pakistan and China and sell to New Zealand, Australia, China and South Korea, so we can deal with other countries just as easily as those.
“Our biggest concern is that there is no infrastructure to deal with Europe. If we sell to China, for instance, we know the documentation process and procedures.
“Even if we don’t have a deal, I think businesses are pretty resilient. What also keeps me optimistic is that we want to buy goods from Europe and they want to buy from us, so it’s not in anyone’s interest to make things difficult. The quicker we get to the March deadline, the better, so everyone knows where we’re at and we can put systems in place to get the best outcome.”
Andrew Trickett, MD of MPT Group, is another who has benefited from the weakness in the pound: “The fluctuations in sterling have been favourable for anyone involved in export – which we do to 86 countries worldwide – and our business in the US has actually risen by +300% since the vote. We don’t anticipate too great an impact when we leave the EU – in fact, things are more likely to settle down, as it will put an end to the uncertainty which naturally creates unrest.”
And there’s a chance that British suppliers may benefit from the uplift in overseas prices if manufacturers follow the lead of Darren Crowshaw, MD of Breasley. He says: “Currency fluctuations are already costing us a fortune, but it’s the same for all our competitors, so everyone is in the same boat. Buying from Europe is now very expensive and we’ve had to pull out of buying a lot of products from there because we could no longer afford to absorb the cost. We now source more in the UK.”
This response must be of concern to some of the industry’s established overseas suppliers. Says Bart Desmet, sales director of Belgium-based Maes Mattress Ticking: “For overseas suppliers such as ourselves, it could be business as usual, or there could be real constraints with everything from transport to service levels affected. There will be customs clearance, etc, to take into consideration, which could affect lead times, which in turn could impact on service levels to customers.
“What happens next year will depend on the kind of Brexit we face – although in theory it shouldn’t be bad if people work in a reasonable way.”
The impact on companies already operating globally is likely to be one of swings and roundabouts as David Elsdon, MD of Gateway Systems, explains: “The main problem for us will be bringing goods into the UK, because most of our machinery is made in Europe. However, we are part of the Global Systems Group, so the impact on the company as a whole will not be that great. We trade mainly in euros, dollars and sterling, so it won’t affect us in quite the same way as UK manufacturers.”
Richard Harris, UK sales director of Carpenter UK, also quotes the benefits of belonging to a multinational operation: “Most of our chemicals come from Western Europe so import tariffs could potentially add to our costs. We don’t know what’s going to happen to those, but whichever way it goes it will affect all UK foam manufacturers – although, as Carpenter worldwide is the only vertical producer of foam with its own chemical plant in the US, sourcing our chemicals from there is an option that is open to us.”
The whole issue of Brexit is one which is currently taxing the minds of negotiators across Europe, yet appears to remain as far from resolution as it was on the day Britain voted to leave. With months of likely intrigue and uncertainty ahead, retaining a sense of perspective is vital.
As Darren Crowshaw so succinctly points out: “To a degree, Brexit has shades of being another Millennium Bug in that there’s an awful lot of hype and predicted doom and gloom around it. So we’d do well to remember that when we wake up on March 29th next year, we’ll all still be breathing and all still selling mattresses!”
This article was published in the November 2018 issue of Furniture News magazine.
