The Furniture Industry Research Association’s annual statistical digest summarises how the UK industry has performed in recent years, offering businesses a valuable benchmark. Here, Furniture News presents an exclusive summary of the latest edition.
FIRA’s latest report covers 2015-18, and includes estimates for 2019 and beyond. Drawing on publicly available data from Government bodies including the Office for National Statistics, HM Revenue and Customs, Communities and Local Government, plus the Bank of England, the report covers areas such as national economic trends, the structure of the industry and trading relationships with the rest of the world across the contract, office and domestic subsectors.
With a focus on the medium-term trends and the changes that took place between 2017-18, here are the key findings …
NATIONAL ECONOMIC TRENDS
The UK furniture and furnishings sector
Total 2018 turnover for the combined furniture and furnishings manufacturing sectors was £12.2b, representing a YoY increase of +3.1% – the largest portion of which was furniture manufacturing, with a turnover of £9.01b. Turnover emanated from 8707 companies, employing some 123,000 individuals.
Furniture and furnishings sales continued to rise into 2019, with Q1 and Q2 consumer expenditures being +5.8% and +4.8% higher, respectively, than their 2018 equivalents.
Furniture and furnishing sales in 2018 (£16.7b) accounted for 26.4% of overall sector sales – a slight increase on the 2017 figure of 25.9%. The wider sector (including specialist retail but excluding general retail) comprised over 52,500 VAT-registered companies, supporting in the order of 339,000 jobs.
Consumer credit and lending
Total net unsecured lending to individuals, having increased on a regular basis over previous years, started to fall in 2009, bottoming out at £207.1b in June 2012. Since then it has continued to increase, reaching £351.7b at the end of 2018 (a YoY increase of +8.8%).
When considering this in value terms, such lending is now 25% of that secured on dwellings, compared to around a fifth (22%) in 2015/16. Some of this increase in lending was attributable to credit cards (2.7% from 2017-18) while other lending saw a YoY increase of +10.5%. Total net lending continued to rise into 2019, with the latest data (March 2019) indicating an outstanding value of £358.2b – which was +8.5% more than the outstanding net lending figure of £330.2b in March the previous year.
House starts and sales
Following a fall in new UK dwelling starts in recent years, a marked increase in the number of starts in 2016/17 of 15,520 (+8.7%) was indicative of further fluctuations in the market – which continued into 2017/18, with YoY growth of +2.3% (equating to an additional 4550 new starts).
The 2017/18 period saw the highest number of new dwelling starts in the UK (198,930) since 2007/08 when the sector peaked at 219,090, with the majority of these in England (165,770, just over 83% of the UK total). Provisional data for 2018/19 hints at a slight fall in dwellings starts for Wales (-1.2%) and England (-0.4) with comparably notable increases for both Scotland (+16.1%) and Northern Ireland (+12%).
Any increases in the building of new homes have significant potential for increasing domestic furniture sales – yet, putting this into context, annual dwelling starts remain below those recorded in the four years prior to the 2008 financial crisis, when they were typically of the order of 220,000-235,000.
The number of non-residential transactions has remained relatively buoyant in recent years, yet the latest figures show a sharp decline into negative growth of -1.6% YoY. In comparison, the residential market in the UK, which had slipped into negative growth across all countries during 2016/17, saw an increase of +4.3% overall during 2017/18 thanks in part to an uplift of +14.2% in Northern Ireland and +8.2% in Wales.
Total transactions for 2018 were slightly higher than the previous year, at 1.331 million, equating to an increase of +3.7%.
Consumer spend
Total consumer expenditure increased between 2015-18 to £1302b (a +7.9% increase over the period, and up +1.6% YoY).
Consumer expenditure on furniture and furnishings was almost £17b in 2018 and far exceeded all other spend in the sector. This represented YoY growth of +10.5%.
The most significant growth in expenditure was in the furnishings, household equipment and routine maintenance sector, which exceeded £60b for the first time (£63.32b).
The latest data shows that furniture and furnishings sales continued to rise into 2019, with Q1 and Q2 consumer expenditures respectively being +5.8% and +4.8% higher than the equivalent periods in 2018.
Furniture and furnishing sales in 2018 (£16.7b) accounted for 26.4% of overall sector sales – a slight increase on the 2017 figure of 25.9%. Education expenditure dipped into negative growth of -0.2% YoY following signs of annual growth of +2.9% and +5.5% from 2015-17.
Average weekly retail internet sales for all products included within this analysis grew to £1.32b in September 2019, reflecting a YoY increase of +11.8% and equating to 18.1% of all retail sales.
FURNITURE INDUSTRY TRENDS
Turnover
By 2015, furniture manufacturing equated to 1.6% of the UK’s total manufacturing turnover and 4.6% of registered enterprises. These figures have remained the same from 2015-18, indicating that while UK manufacturing overall has grown, furniture manufacturing has grown at an equivalent rate.
Total provisional turnover in 2018 was £9.01b, which was +3.1% higher than the previous year and an overall increase over the period from 2015-18 of +13.1%.
In 2018, 6379 UK furniture manufacturers employed an average of 93,000 individuals, representing a YoY increase of +2% in respect of the number of manufacturers, and an increase of +4.5% in terms of personnel.
Despite its turnover being 1.6% of the total for UK manufacturing, the furniture sector employed 3.6% of all UK manufacturing personnel, which is estimated to have equated to 2.4% of the UK manufacturing wage bill.
Following a period of decline from 2015-17, turnover in the office and shop furniture sector grew by +9.4% from £2.02b to £2.21b between 2017-18. Although the initial indication of a potential recovery is encouraging, this sector has yet to reach the 2015 peak of £2.25b.
Three consecutive years of growth in the kitchen sub-sector from 2016-18 of +46.4% overall has resulted in turnover of £2.44b. The number of enterprises also continued to grow by +6.7% from 2017-18, to 1413.
Following an extended period of growth from 2012, 2017/18 YoY figures for both the number of companies and turnover slipped into negative growth in the mattress sub-sector. Turnover of £0.83b in 2018 reflected +10.9% growth in the period from 2015-18 and +47% since 2012.
The ‘other furniture’ category (encompassing upholstery and cabinet) remains the industry’s largest sub-sector, accounting for 39.2% of sector turnover in 2018.
The greatest growth over the 2016-18 period occurred within the kitchen sector, with manufacturer sales and other income increasing by +10.8% and +28.5%, respectively.
Company size
The industry is dominated by micro- and small- to medium-size businesses, with just 310 companies (3.3%) operating at turnovers in excess of £5m (an increase of 10 when compared to the previous year).
A total of 150 companies turned over more than £10m, which was slightly higher than the previous year (145).
The latest data indicates 6360 companies in the sector, an increase of +1.6% when compared with 6260 in the previous year, with most of this growth seen in the number of companies turning over less than £1m.
Just over 82% of companies turn over less than £1m, and the largest percentage of companies are in the £100,000-£250,000 turnover band (31.8%).
In the mattress and office and shop sectors, the percentage of smaller companies is lower than for the other sectors (54.3% and 67.4% of businesses within these sectors turn over less than £1m, respectively).
The mattress sector has proportionately more large companies than the others, with 20% of companies turning over more than £5m. In comparison, 11.2% of companies within the office and shop sector turned over more than £5m, followed by the kitchen (3.6%) and other furniture (3.4%) sectors.
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 2018, around 78% of companies employed less than 10 people, and only 40 companies (0.63%) employed more than 250.
The South East has proportionately more companies than any other region (13.6%) and, when combined with London, accounts for 24.7% of all UK furniture manufacturers.
When considering turnover by region, Yorkshire and the Humber has a larger proportion of higher-turnover (£5m+) furniture manufacturers than elsewhere in the UK (9.3% of the companies in the region).
INTERNATIONAL TRADE
The total provisional estimate for UK furniture manufacturer sales in 2018 was £7.13b. When adding on other manufacturer sales and income derived from other activities, however, the total attributable turnover for the furniture manufacturing sector increased by +4.3% to an estimated £9.63b.
In terms of product sales, imports decreased fractionally to 51.2% of the home market which, based on manufacturing, export and import data, was estimated to be £12.04b. The total home market, including income derived from other sources, was £14.55b (about £0.40b higher than in 2016).
Imports
Imports of furniture into the UK in 2018 decreased by -2.3% to £6.17b compared with the previous year’s figure of £6.31b. Indications for 2019 are that this figure could decrease further to around £6.06b due to continuing uncertainty surrounding the impact of the UK’s departure from the EU.
The majority of imports again originated from China (£2.02b), with its share of imports into the UK dipping slightly to 32.8% when compared to 34% the previous year.
In purely financial terms, Italy retained its position of second in the hierarchy of furniture exporters to the UK, albeit following YoY growth of just +1.2%. Poland and Germany remained in third and fourth positions, respectively. Despite negative growth of -7.9%, there remains a reasonable gap between Germany and Vietnam (which is in fifth position).
The value of 2018 imports from the European Community was £2.74b, a slight decrease of -1.7% on the previous year (£2.79b).
Initial estimates for 2019, based on data extrapolation, indicate a potential decrease of around -8.75% in furniture imports from the EU itself to around £2.51b. In contrast, imports from non-EU countries may rise to £3.55b.
Exports
Furniture exports have continued to grow in recent years, from £1.06b in 2016 to £1.25b in 2018 (+18.7% over the period). YoY export growth between 2017-18 of +5.6% accounted for an additional £66.4m.
Exports to Europe have grown over the period from 2016-18 by +24.5%, with YoY growth of +7.7% between 2017-18 (£55.76m).
Exports to the Irish Republic continue to grow YoY and reached £0.28b in 2018, an increase of +8.3% from 2017. In 2018 it received 22.2% of all UK furniture exports.
There was a significant YoY increase of UK furniture exports to the UAE (23.8%), which received 2.5% of all UK furniture exports, and moved from 10th to eighth position with a total value of £32.22m.
Exports to China appear to have slowed considerably following previous YoY growth over 2016/17 of +10.5%. In 2018 the market received £32.16m of goods (around 2.56% of all furniture exports), a sharp decrease of -26.9% when compared with the previous year (around £44m).
Despite the uncertainty surrounding the UK’s imminent exit from the EU, exports to countries within the EU have remained relatively stable overall since 2014, although 2017-18 saw a marginal increase, with 62.4% of all exports going to the EU when compared with 61.3% during 2016-17. Preliminary figures for 2019 indicate this could potentially rise again to around 65%.
In 2018 the negative trade gap narrowed from £5.13b to £4.92b, although the decrease was slightly less than the preliminary figures released in 2017 suggested. Initial figures suggest that the gap may reduce further to -£4.87b by the end of 2019.
While the previous section highlighted exports to European countries as a positive asset, the reality is that many of these countries continued to export more to the UK than vice versa. However, this narrowed in 2018 to £1.96b when compared with £2.06b in the previous year.
The main positive trade gap, as in previous years, was with the Irish Republic, which has widened from £0.20b in 2017 to £0.23b in 2018. Preliminary figures for 2019 indicate a turnaround, however, with a potential decrease to £1.99b.
The most striking figures were in respect to Belgium, which moved from a negative trade gap of -£10.4m in 2017 to a positive trade gap of £5m in 2018.
The full FIRA report is available free to members of the Furniture Industry Research Association, and for £2000 (+VAT) for non-members. This article was published in the March 2020 issue of Furniture News magazine.
