Manufacturers reveal the Brexit effect

GDPA Boiler – Union Jack (Small) crop
Glen Dimplex MD Mike Butt believes ‘Buy British’ will become more important as a result of Brexit.

The Brexit process has already impacted much of the catering equipment industry, with exchange rate fluctuations forcing many suppliers to increase their prices, an effect which has rippled up the supply chain. But with the official EU exit process now triggered, what do British manufacturers feel will be the impact, and are they going to change their strategies as a result?

Glen Dimplex Professional Appliances’ MD Mike Butt says he wishes he knew what the future impact will be. “The only certainty we have at the moment is rising costs due the devaluation of the Pound. This is forcing everybody to work harder on reducing cost and mitigating the impact of the price rises.”

However, he detailed that: “We have a good export business which on the flip side the devaluation is helping us. We are focusing on taking this advantage.”

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As to whether the cooking, refrigeration and water boiler equipment manufacturer will look to source more components from the UK, Butt commented: “We will source the best components for the job. At times like this it is important not to lose sight of quality through value re-engineering.”

Looking ahead, he added: “Key changes I see are more technology-based appliances with connectivity playing a big part. The purse strings will remain tight so a keen eye on value will strengthen. Regardless of any potential trade barriers, I do feel ‘Buy British’ will become more important as a result of this process.”

Over at Hobart Warewashing, it was one of a number of firms which recently increased its prices. “The company is reliant on the purchase of machines, spare parts and also raw materials in many currencies but is particularly exposed to Euro and US Dollar prices,” explained sales director Tim Bender.

“At the turn of the year we earmarked the devaluation of Pound Sterling against not only the Euro but also the US Dollar, as having by far the greatest impact on trading. Exchange rates may have stabilised since the large scale falls following the referendum, yet volatility caused by uncertainty over the UK’s protracted farewell is still very much a factor.

“Following a period of careful market monitoring and introspection, we took the difficult but necessary step of raising prices by between 5 and 8% effective from last September. Similar rises have been implemented in most catering equipment businesses since, proving that, though we may have made the first move, we were not alone in our concerns.”

Bender underlined: “With the uncertainly looking likely to continue indefinitely, the focus must now be on continuing to add value to dealers and end users, and maintaining levels of excellence, hard forged through boom and bust.”

Elsewhere, Instanta operations director Dave Wilson takes a balanced view about business prospects: “Undoubtedly there will be challenges and risks that impact on our business such as potential for tariffs on EU imports, the fall in Sterling, restricted labour supply and less influence in the legal framework coming out of the EU. However, many UK manufacturers such as Instanta will be more attractive to overseas businesses as we become more competitive due to the exchange rate. We should have greater flexibility to trade with countries outside the EU as we go forward.”

With the water boiler specialist’s strategy being to adopt risk- and opportunity-based thinking, the firm will continue to source components from the UK as much as possible.

Wilson was also upbeat about the future: “If we remain alert and responsive to developing issues and new information that comes out of the post-Brexit negotiations and embrace the opportunities that are available to us, we believe the British equipment manufacturing industry can remain strong and competitive for many years to come.”

One of the biggest British catering equipment manufacturers, Lincat, expects business as usual during the Brexit process. “Apart from the impact on costs from the depreciation of Sterling, we have seen no ill-effects since the referendum,” reported MD, Nick McDonald. “The market is strong and British manufacturers, like Lincat, are in a beneficial position against imported product.

“Operators are also beginning to see British-built equipment as a safe option when it comes to thinking about whole life costs. They are worried that if the Pound continues to fall as we move towards Brexit, the cost of spare parts for imported products could be prohibitive 2 or 3 years down the line.”

The current situation has not changed Lincat’s business strategy and it will continue to base component-sourcing on quality, reliability and price.

McDonald summarised: “The catering equipment industry has evolved over the years and will surely continue to do so. Inevitably, there will be winners and losers. Provided British manufacturers are prepared to invest in their operations to drive efficiencies, then they can face the future with confidence – Brexit or no Brexit!”

For Mitchell & Cooper MD Guy Cooper, there are still many unknowns to give manufacturers reason for concern. “As Brexit continues to move forward we are expecting to see delays in both import and export shipments due to the introduction and increase in border checks. For manufacturers relying on imported products, or for those with large export markets within EU countries, any delays will need to be planned for carefully to ensure as little disruption as possible,” he said.

“The loss of EU member duty rates for UK businesses will also lead to changes in product pricing, and will no doubt give manufacturers pause for thought on how best to structure their imports and exports going forward. At Mitchell & Cooper we export as much as we import, which allowed us to absorb some of the exchange differences Brexit produced.”

In preparation for a post-Brexit market, Mitchell & Cooper has both invested in new staff members to develop its export markets and expanded its product development team with a focus on creating home grown products.

Shelving specialist, Craven Solutions, feels it has not been so exposed to exchange fluctuations as its competitors, as it manufactures and sources more from the UK. However, sales director Neil Fox reported: “Unfortunately, the majority of our raw materials are impossible to source in the UK. Our nylon coating powder comes from the EU and that is probably our greatest value commodity from Europe and is certainly product critical. We have identified UK suppliers so we’ll soon have the option, but we’ll make the decision on more than price.”

On a positive note, the firm has seen more enquiries from abroad, particularly the Middle East. Fox detailed: “The best way to describe our strategy at the moment is as a wait and see policy. We believe that Brexit will have a changing impact on our business and the industry as a whole for some years to come. But if a business was a successful and long established UK manufacturer (as we were) on 22 June 2016, then we believe they will have the skills, knowledge and flexibility to continue to prosper.”

At Leeds-based fabricator, Pland Stainless, MD Steve Duree warned: “Wherever uncertainty exists then customers will naturally resist spending unless there’s an absolute necessity for a product. However, we expect to receive more enquiries from our contacts because our nearest competitors have moved their manufacturing base to mainland Europe.

“We are pushing much more our commitment to ‘Made In Britain’. As a nation, the will of the people has been invoked with Article 50 and we all need to look inwardly when sourcing to see if we can obtain an equivalent or improved product/service from within the UK. However, we have looked to source European supplied-products from within the UK but haven’t found a suitable alternative. This will not stop us looking.”

Looking forward, Duree was very positive: “If we can match our European sourced product in terms of quality, then there’s huge potential for our own manufacturing industry to grow and prosper. If we can do this and look at inward investment then we may well have a bright future to look forward to.”

The Brexit process has already brought benefits to Synergy Grill, as set out by CEO and chairman, Justin Cadbury: “Responsible food groups are now seriously aware, particularly for the young looking for jobs, buying British where they can. Synergy Grill is a British invention, patented and 100% British owned, employing a British workforce. This ensures users will get immediate and a high-quality service back-up.

“Furthermore, it has given us the opportunity to focus on more resources worldwide within a quicker timeframe in the export market. Having just returned from Australia where we are in the process of setting up an operation, and spending time in South Africa, the whole Brexit publicity has focused attention on British companies and there is a feeling of admiration and respect that the British are prepared to take their leadership worldwide.”

Cadbury concluded: “Catering companies have historically looked for the simple ‘one package deal’ where they can purchase many products from one supplier. New technology now paves the way for new ways to do business by providing better quality food, service and access to products that will make a difference by driving up standards. Synergy is well suited to this process.”

Over at canopy manufacturer, Mansfield Pollard, Brexit has prompted the firm to review its procurement chain as well as looking at strengthening exports. “Whilst the agreement of future trading deals are hoped to be successful, we have also considered the impact the possible imposition of quotas and tariffs may have, given our proposed exit from the customs union,” said finance director Allison Howgate.

“Brexit has most definitely lead to changes in our strategic approach. An increased focus on growth in our export market would otherwise have taken place in a different time frame. We are also cognisant of the potential boost to the UK’s internal markets, and how we may best capitalise on this opportunity, as customers try to limit their exposure to the weak Pound and source components and products from within the UK.

“We are hopeful that a willingness to embrace the changes that will inevitably ensue will place us in as strong a position as possible to capitalise on what is undeniably going to be a period of great challenge and of immense change.”

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Clare Nicholls

The author Clare Nicholls

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