Should Glazing Industry Prices Be Coming Down?

Should Glazing Industry Prices Be Coming Down?

At the time of writing this post, Sterling stands at $1.3255 against the Dollar (it fell back a little after the BoE’s announcements on Thursday). This is the highest it has been since September 2016, and has gone against most of the economists’ forecasts that a hung Parliament, or the general state of the UK economy would see Sterling sit in the low $1.20’s. Naturally, I am happy to see the UK currency proving many wrong.

Credit: Bloomberg

Against the Yuan (Renminbi) Chinese currency, Sterling sits at 8.91 CNY per British Pound. Again, the highest for about a year. So many were negative against Sterling, predicting much lower levels than it currently sits at. Turmoil in the US political scene and continuing underlying strength has seen the UK do better than expected.

However, we are all aware of the enormous price increases implemented by suppliers in the window and door industry in the past 12 months. Straight after the Brexit vote, many took the opportunity to raise prices, some just hours after the result, when nothing materially would have actually changed. Since then, we have seen raft after raft of increases. The early ones blamed on Brexit. The rest blamed on “higher production costs” and other similar matters to which we don’t have the privilege to see the detail of. But consider this, oil has been fairly low for quite a while. Inflation in most other parts of the world is low. These are things that affect production costs. So if they’re already low, where exactly are these rises coming from?

Anyway, that’s not my specific beef today. Today, I want to explore the idea that as Sterling posts a decent recovery against the two other currencies to which the window industry buys a lot of it’s goods in, is it time for the price increases blamed on Brexit to be reversed?

Time to be reversed?

Admittedly, the once currency Sterling has yet to rise against is the Euro. It’s around 1.12 per GBP at the moment, and it’s been within a range of this for quite some time.

That being said, plenty of what the UK window and door industry uses is bought in Dollars and Yuan, two currencies that Sterling has recovered against steadily for months now.

I have commented throughout the year that as our currency starts to recover, installers who have been hit with price increases that have been blamed exclusively on Brexit will start to become pretty loud about those being rolled back. And lets be clear, there have been some fairly hefty increases throughout the past 12 months. We’re not talking the odd percentage point here and there. We’re looking at high single digit increases, double digit increases and some past 20%. Many using Brexit as the justification for those increases.

Off that bat those levels of increases and the sheer number of them now far outweigh the physical cost of the drop in Sterling. Other contributing factors haven’t risen all that steeply either. So I think it is fair to say that some companies have used the last 12 months to pull in some extra cash.

Remember, our industry still has to support itself, so if and where prices can be brought back down again thanks to currency recovery, then it will be welcomes by installers and will help lift a burden on their sales.

Sterling is now a good 12 cents higher than it’s low since the flash crash last October. That’s not an insignificant rise. Even if it’s only a couple of percent for now, this should be passed down to installers.

Some, already are.

DGB Tech

ERA and Brisant lower their prices

The other day I mentioned the recovery of Sterling on Twitter and this is one of the responses to my tweets on the matter:

Many will know that Brisant were one of the first, and remain one of very few companies to operate an open pricing policy and have pledged to peg their pricing according to the fluctuations in Sterling. So, if Sterling rises, Brisant will lower their costs. If Sterling drops, expect prices to go up. It’s fair, it’s honest and it’s open. Installers appreciate that, and won’t mind if prices go up if they know that their supplier has been totally transparent about it.

ERA also appears to be operating a similar policy. It is good to see that there are a few companies out there who are fully prepared to be flexible when it comes to currency related price changes. An industry that supports itself on matters like this is a strong industry.

That being said, I know of no other company, other than ERA and Brisant, who appear willing to operate a fair and open pricing policy with their customers. My hope was if one or two came out and did it, it would increase pressure on others to open up a bit and demonstrate a level of flexibility with their customers. As of yet, this has not happened, which is disappointing.

Sterling has recovered a fair bit, and commodity prices have remained steady. I find it impossible to believe that those suppliers who blamed Brexit for their cost increases have not yet had even a small amount of relief by now. I believe that many are holding on, and often choosing to continue to raise prices while the lay of the land allows them to. In some areas I think there is some serious profiteering going on.

I cannot remember a time when Sterling and currency in general has been under the spot light so much in recent times. Don’t get me wrong, this is a good thing. The more people that understand how the currency markets work and the influences they have the better. What I would hope is that assuming Sterling continues it’s steady rise back to some sort of normal level in the coming months, installers find their voices and put pressure on those above to pass down those savings. Remember, so many of these increases have been blamed on the drop in Sterling. Well, we’re at 11 month highs at the moment against many other currencies. That excuse isn’t holding much water for much longer.

I will be keeping an eye on this in the coming weeks and months.

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By |2017-08-03T22:25:03+00:00August 3rd, 2017|Categories: business|

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