For good or for ill, Brexit will impact every aspect of UK plc, and with catering equipment fabricators typically having to import raw materials, they could be a section especially affected. Therefore Catering Insight asked a selection of fabricating firms to detail their preparation plans.
At Corsair, MD Arun Sahajpal feels that the key driver for raw material costs will be Sterling. “Whether you buy from a UK raw material stockist or import direct, it has all been upward pressure on costs since the pointless referendum of June 2016,” he commented.
“The UK infrastructure for manufacturing companies has been decimated over the past 20 years and so the ability to ‘source UK’ has been greatly diminished, giving UK-based manufacturers options like bearing higher input costs using imported material or starting to import non-bespoke finished product from cheaper overseas suppliers.”
But in terms of future currency fluctuations he believes: “The impact will be positive if they involve exporting and negative if they involve importing. The positives will accrue if companies are competing against similar price and quality imported finished products, since the importer will be paying more for those items against UK-manufactured items, whereas the negative impact of the currency is only felt on imported raw materials and components as opposed to the entire cost base.”
Corsair is always reviewing alternative materials as a matter of course, not especially as a contingency plan following Brexit, though Sahajpal emphasised: “We have a fairly conservative customer and specifier base which most manufacturers are loathe to guide or challenge. We are building direct relationships with overseas sourcing companies and bypassing importers where feasible.”
While he thinks it’s possible that Corsair and other fabricators may have to switch the raw materials they use in the wake of Brexit, he added the caveat: “But only if we can work together to convince the market and specifiers that alternatives deliver no reduction in performance.”
Over at Proline, the Liverpool-based firm hasn’t judged whether raw material costs will be affected by Brexit, at least until a deal or a ‘no-deal’ scenario is finalised. Estimating manager Paul Curran surmised: “The costs have remained static in the last 2 years since the original vote. Steel for instance, which we buy a lot of in sheet and tube form, is a commodity that is floated on the stock market so prices can fluctuate.”
He also doesn’t believe that a raw material switch is an option, as: “Projects have specified materials; it is not generally for us to decide. We can only price the project during the tender process and hope that suppliers will keep the prices quoted, should we be successful in our bid.
“As a lot of our projects are long term we would hope that that the contract agreements with our suppliers would mitigate any disruption.”
In terms of currency changes, he feels: “We would like to think currency has bottomed out which should really see raw material prices stabilise, which in turn should be a positive for future purchasing.”
Fellow Merseysider, Trak Systems, is looking ahead with trepidation at the Brexit impact. Director Philipp Schumacher commented: “We believe costs will rise initially and alongside potential currency fluctuations we believe importing steel to the UK could significantly increase moving forward. Tariffs will be an additional issue for both the UK exporting and importing markets, which is likely to also affect costs.”
He reported: “The Pound has dropped since Brexit, but a slight positive for us is increased sales in export, certainly in this transition period. We have received orders from EU and other countries relative to the Pound falling, so the impact has been pretty neutral so far.”
Nevertheless the firm is continually examining contingencies, with Schumacher revealing: “We have investigated sourcing from countries outside of the EU generally. There are also substitute composite metals similar to stainless steel which are available, but from our point of view this would not be a route we would take as certain market sectors expect the correct materials within the fabrication. However, this brings associated increases if materials
He feels that Trak probably would not change the raw materials it uses, though he added: “In our sector the main material is stainless steel so it is unlikely we will switch. Although there are cheaper composite materials similar to stainless steel, this would not be suitable for a few of the sectors we manufacture in, for example the medical and pharmaceutical sectors.”
Elsewhere, a major fabricator who wished to remain anonymous predicted that Brexit will see raw material costs increase, possibly significantly. A spokesperson stated: “Firstly, with the Pound in its current weak state, and since the majority of product is imported into the UK these days, costs will have to rise to reflect this currency shift. Post-Brexit, unless a trade deal is reached, paperwork and red tape will increase, and with it an associated cost. Again, this will be bound to affect materials costs.”
The fabricator has always used multiple materials and component sourcing for price comparison purposes, so it constantly has alternative plans to fall back on. The spokesperson added: “I can see in the short term, until the Pound stabilises, there will be an attraction of sourcing entirely British manufactured product. Unfortunately, this will be quite difficult to put into practice as often most components are imported.”
Currency movements will have both a welcome and unwelcome impact on the business, as it exports some product, so a weak Pound would be advantageous for that channel and make the firm highly attractive. However, since material costs may increase, the selling price will rise too. According to the spokesperson: “In reality it is the UK labour rate that will be very attractive for overseas buyers and to domestic buyers as well.”
In terms of events forcing a raw materials change, the spokesperson detailed: “British-made raw materials will be advantaged with the current exchange rate and the possible future red tape.
“However, there are so many unknowns with Brexit, who can say? We will simply have to take each day as it comes and do our best. Overall the biggest issue we are faced with is the complete uncertainty of the situation. Nobody is able to predict what is going to happen, even the possibility of a second referendum. Whilst this uncertainty exists the whole situation is very unstable.”