21 July 2024, 10:43
By Suzie Radcliffe-Hart Mar 29, 2019

FIRA presents a snapshot of the UK furniture industry

FIRA’s annual statistical digest provides a summary of how the UK furniture industry has performed in recent years, drawing on data from a variety of sources to identify the manufacturing, spending and trading trends that have defined the sector, and offering businesses a valuable benchmark against which to measure their activities. Furniture News presents an exclusive summary of the digest, with commentary from its author, Suzie Radcliffe-Hart …

Published in February 2019, the report covers 2014-17, and includes some estimates for how 2018 will be recorded, and beyond. Drawing on data from Government bodies such as the Office for National Statistics, HM Revenue and Customs, Communities and Local Government, plus the Bank of England, FIRA’s digest provides the industry with a good historical benchmark against which to measure its activities.

Covering areas such as national economic trends, the structure of the UK furniture manufacturing industry and trading relationships with the rest of the world, the report delivers figures across contract, office and domestic subsectors.With a focus on the medium-term trends and the changes that took place between 2016 and 2017, here are the key findings of the latest report …

The UK furniture and furnishings sector

The UK furniture and furnishings sector – comprising design, manufacturing, retail and repair – is much larger than many people think. Total manufacturing turnover for this sector in 2017 was £11.83b, representing a YoY increase of +4.8% – the largest proportion of which was furniture manufacturing, at £8.76b. This turnover emanated from 8489 companies employing 120,000 individuals. 

The wider sector, including specialist retail but excluding general retail, comprised over 52,000 VAT-registered companies, supporting in the order of 338,000 jobs.

Consumer credit and lending

After 2008, total net unsecured lending to individuals in the UK continued to fall, bottoming out at £207.1b in June 2012. Since then it has increased, reaching £321.1b by the end of 2017 (an increase of +10.3% on the 2016 figure). 

Some of this increase in lending was attributable to credit cards (+5.3% from 2016-2017), although lending through other channels was, comparatively, +11.7% greater than at the end of 2016.

Total net unsecured lending continued to rise into 2018, with the latest available data (March 2018) indicating an outstanding value of £327.6b, which was +8.7% more than the outstanding net lending figure of £291.2b in March of the previous year.

In addition to the above, there has been a gradual rise in lending secured on dwellings, which increased by +3.3% from the end of 2016 to the end of 2017. At the end of 2017, lending secured on dwellings reached £1366b, and preliminary data for 2018 shows that this figure increased to £1390b by September last year.

House starts and sales

Following a fall in new UK dwelling starts in recent years, there was a significant increase in the number of starts in 2016/17 of 23,780 – equating to +13.5% when compared with 2015/16. Indeed, 2016/17 saw the highest number of new dwelling starts in the UK since 2007/08, when the sector peaked at 219,090.

Suzie Radcliffe-Hart, technical manager at FIRA International and the author of the digest, comments: “It is possible that this reflects the pressure on Government in recent years to increase the number of available and affordable housing developments. With new housing – or even home improvement – comes potential additional spend on furniture and furnishing items, both large and small.”

Provisional data for 2017/18 hints at a significant fall in dwellings starts for Wales (-12.1%) with comparably slight decreases for both England (-2.9%), and Northern Ireland (-2.7%). Data was not available for Scotland.

Any increases in the building of new homes have significant potential for increasing domestic furniture sales. However, annual dwellings starts remained well below those recorded in the four years prior to the 2008 financial crisis, when they were typically in the order of 220,000 to 235,000.

However, the UK’s new homes trends do not mirror property transaction statistics – the total number of UK property transactions above £40,000 decreased by -0.9% from 2016-17.

Whilst the number of non-residential transactions remained relatively buoyant from 2014-16, growth dipped slightly from 2016-17. The total number of transactions reached 1.35m – a slight fall when compared to the previous year. 

Consumer spend

Total UK consumer expenditure increased between 2014-2017 to £1259b (an increase of +8.1%). Expenditure for the wider furnishings, household goods and routine maintenance sector rose by +25.5% from 2014-17, with YoY growth of +7% over 2016-17. This expenditure increase exceeded that seen in all other competitor sectors.

Consumer expenditure on furniture and furnishings was almost £17.5b in 2017 and exceeded all other spend in the household goods sector. This represented a +21% increase from 2014. The YoY growth from 2014-16 was +6.9% and +4.8%, respectively. However, growth from 2016-17 was higher, at +7.9%.

Average weekly internet sales for household goods, 2015-18

The latest data shows that furniture and furnishings sales continued to rise into 2018, with first and second quarter consumer expenditures being respectively +8.5% and +8.3% higher than for the equivalent periods in 2017. 

Turnover

Total furniture industry provisional turnover in 2017 was £8.76b, which was +7.2% higher than the previous year and an overall increase over the period from 2014-17 of +14.9%.Furniture manufacturing in 2014 equated to 1.46% of the UK’s total manufacturing turnover. In 2016, this had increased to 1.60%, and 2017 figures show that this has remained stable.

In 2017, 6254 UK furniture manufacturers employed 89,000 individuals, on average. Despite its turnover being 1.60% of the total for UK manufacturing, the furniture sector employed 3.46% of all UK manufacturing personnel, which is estimated to have equated to 2.4% of the UK manufacturing wage bill. 

Office and shop furniture, unlike the other subsectors, saw turnover continue to drop between 2016-17 from £2.05 to £2.02b (-1.27%).

Turnover in the kitchen subsector had historically fallen from a high of £1.70b in 2008 to a low of £1.15b in 2011, and whilst turnover increased back to £1.73b by 2014, 2015 was a comparatively poor year, with turnover dropping back to £1.68b. However, consecutive data for 2016 and 2017 suggests that this was just a blip, with YoY increases in turnover of £1.99b (+19.1%) and £2.34b (+17.7%) respectively. 

The increases seen were larger than might have been expected, and it is difficult to judge whether it was all attributable to the market, or whether it was partially due to data reconciliation issues.

The mattress subsector continued to grow, with the £0.85b turnover in 2017 reflecting a +28.4% growth in the period from 2014-17, and +68.8% since 2010. Turnover in 2017 was +3.7% greater than in 2016. Company numbers also continued to increase, with the 174 registered companies in 2017 equating to a +10.8% increase on the previous year.

“It is possible that figures in this particularly buoyant sector could be down to multiple factors, including growth in the number of mattress-in-a-box products available, potential impact of activity and campaigns by organisations such as the The Sleep Council, as well as publicised information and advice on replacing a worn mattress, which may have had a positive effect on figures in this sector,” says Suzie.

The rest of furniture manufacturing comes under the heading of ‘other furniture’ and comprises the largest of the industry’s four sub-sectors. In 2017, turnover reached £3.55b, representing an increase of +7% over the 2016 figure of £3.32b. 

This category has a significant influence on UK furniture manufacturing’s overall performance figures, accounting for 41% of turnover. As such, any recovery in turnover here normally reflects the overall position for the whole furniture sector. 

Company size

Furniture manufacturing continues to be dominated by micro and small- to medium-sized businesses, with just 300 companies (5%) operating at turnovers in excess of £5m. Indeed, just 130 companies turn over more than £10m, which is slightly lower than in the previous year.

The latest data (October 2018) indicates 6260 companies in the sector, compared with 6230 in the previous year. Most of this growth has been in the number of companies turning over less than £1m, although there has been a slight increase in the number of organisations in the £1-5m bracket, as well as the £5-10m and £10-50m brackets. This, particularly in the higher turnover brackets, is assumed to be due to growth rather than new entrants. 

Number of furniture manufacturers in turnover bands by region

Over four-fifths (82%) of companies turn over less than £1m, and the largest percentage of companies are in the £100-250k turnover band (30.4%) – and there remains a significant proportion of extremely small companies within the whole furniture manufacturing sector, with 55.7% of organisations operating at turnovers of less than £250,000. 

In the mattress and office and shop sectors, the percentage of smaller companies is lower than in others (52.9% and 66.9% within these sectors turn over less than £1m, respectively). Conversely, in the other furniture and kitchen sectors, this figure is significantly higher, at 85.9% and 84.9%, respectively. 

The mattress sector has proportionately more large companies than the others, with 23.5% of companies turning over more than £5m, an increase of +33% from 2016. In comparison, just 9.9% of companies within the office and shop sector turn over more than £5m, followed by the kitchen (3.8%) and other furniture (3.1%) sectors.

International trade

Imports of furniture into the UK in 2017 increased to £6.01b, compared with the previous year’s figure of £5.4b. Indications for 2018 are that this figure could decrease slightly to around £5.9b, which could be due to continuing uncertainty surrounding the impact of the UK’s departure from the EU. 

The majority of imports originated from China (£1.98b), with its share of imports into the UK dipping slightly to 33% when compared to 35% in the previous year.

In purely financial terms, Italy regained its position of second in the hierarchy of furniture exporters to the UK. Poland moved to third position, with Germany dropping to fourth. In round terms, these countries accounted for 10%, 9.5% and 9% of furniture imports into the UK, respectively, at around £0.5b each.

Furniture imports into the UK, 2017

The value of 2017 imports from the European Community was £2.73b – an increase of +10.6% on the previous year (when it was £2.46b) and +23.8% (£0.52b) over the period from 2015-17. 

Furniture exports have continued to grow in recent years, from £0.89b in 2015 to £1.14b in 2017, equating to a +12% increase from 2016-17, a marginally greater percentage increase than the +11.48% figure for imports over the same period. In pounds sterling, this increase of £122.7m in exports was significantly smaller than the £619m increase in imports. The prediction for 2018 is that exports will continue to increase and could reach £1.21b, which would represent a +6.3% improvement on 2017.

Exports to the Irish Republic continue to grow YoY, and reached £0.24b in 2017 – an increase of +16.2% from 2016. 

There was an increase in UK furniture exports to the US in 2017 (£20.1m, which accounted for 12.6% of the total. Germany and France, next in the hierarchy respectively, both received 9% of UK furniture exports.

Trade with leading European nations continued to be the main source of export income, with 60.5% of UK furniture exports in 2017 going to the European Community (totalling £687.3m).

Furniture exports from the UK, 2017

Exports to China appear to have slowed following significant YoY growth over 2014-15 and 2015-16 of +60.9% (£7m) and +110% (£20.6m) respectively. In 2017 the market received £43.4m of goods (an increase of +10.7% on the previous year) whilst early estimates for 2018, based on extrapolated data, indicate a potential decrease in exports of up to -25%.

Suzie comments: “There has been a reasonable amount of publicity recently in relation to a potential deceleration of economic growth in China, some of which may be attributable to recent exchanges between the market and the USA. There may also be other factors, such as the sourcing of components and materials from other markets, which has grown steadily in recent years.”

Although the negative trade gap continued to widen from -£4.71b to -£4.87b, the increase was far less than originally expected, at just £0.164b (+3.5%). Initial figures suggest that the gap may reduce to -£4.68b by the end of 2018.

Despite the UK’s stronger export performance, the 2017 negative trade gap with China (the largest for the sector) increased to £1.93b (from £1.86b in 2016). This was followed by negative trade gaps with Poland, Italy and Germany, which equated to £0.56b, £0.55b and £0.44b, respectively.

The main positive trade gap, as in previous years, was with the Irish Republic. This gap, despite the republic’s recent increases in exports to the UK, moved from £0.16b in 2016 to £0.19b in 2017, with predictions for 2018 indicating that this could increase, albeit by a smaller percentage, to around £0.20b. 

After this, there was a number of countries with which the UK benefited from much smaller positive trade gaps in 2017, starting with Saudi Arabia at £10.9m and Russia at £8.3m, although both markets saw a slight decrease, of £0.25m and £2.2m, respectively.

The most striking figures were in respect to the US, which slipped from a positive trade gap of £41.5m in 2016 to a negative trade gap of -£38.8m in 2017. It is thought likely that the recent issues surrounding trade tariffs are responsible for this shift.

“It is possible that recent issues around trade tariffs, as well as frequent fluctuations in state-specific regulation, could pose a challenge to exporters,” says Suzie of international trade in general.

“This data is so important to both our own and wider industries. In preparing the latest digest, I’ve been impressed by the resilience of the furniture industry – particularly when considering the economic challenges of the last two years and the uncertainty surrounding the UK’s departure of the EU,” Suzie concludes. “We are part of a truly global industry, exporting products all over the world from Algeria to Zimbabwe.”

Suzie Radcliffe-Hart, technical manager at FIRA International and secretary of the Furniture Industry Research Association, compiled this year’s digest on behalf of the association. The full report is available free to FIRA members, and for £2000 otherwise. All findings and summaries in this article are subject to copyright, being issued by FIRA International, the exclusive service provider to the Furniture Industry Research Association.

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