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Could There Be A Wave Of Industry Disruption?

Could There Be A Wave Of Industry Disruption?

It felt like August was the climax to some of the risks that were present in the industry right now. Usually a slow month on all fronts, the industry was plagued with administrations, plunging share prices, profit warnings and reports of falling sales. It was far from a positive picture in some of the largest parts of our industry.

As a result, it has exposed weaknesses in some areas of our industry. Last time we had anything like this we saw a number of companies go to the wall, this was during the Great Recession which got into full swing a decade ago. Are we about to see the same thing?

Cycles

They say economics run in cycles, at least in the Western world. No matter what Governments do, the economy tends to have a dip and a bounce every ten to 12 years. A decade ago of course we saw the biggest dip in the health of the world economy since the Great Depression. Since then, there has been a steady recovery across the board by most measurements.

Back then, the UK window industry lost a lot of companies. Some will argue deadwood, ripe for wiping away anyway. In the ten years since the economy ground to a halt, there has been a lot of consolidation. Mergers and acquisitions have been in full swing. We have seen the emergence of new super-groups. We have less installers and fabricators, and the ones left have diversified into very different companies to ten years ago.

We’re nearing the end of that cycle once again, and in the past couple of months we have seen a number of companies and certain parts of our industry go through a pretty tough time of it. The biggest casualty being Entu and their eventual saving from administration via the Latium Group.

For me, it has exposed weakness in certain parts of our industry that we may have either ignored or simply did not identify being there. The weakness for me lies in the part of the residential market that relies on volume and cheaper products. The demographic those types of companies rely on are also the most likely to reduce or even stop spending on home improvements at the smallest sign of things going south.

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Underlying weakness

There is no doubting that since the Brexit vote UK growth has stepped down a gear. I don’t believe that we are anywhere near a recession or anything like what we saw a decade ago. But growth has slowed. You have to wonder if even this small leg down in growth has been enough to expose some of the weakness in certain parts of our industry.

As I mentioned above, certain demographics in this country will stop spending abruptly at the smallest sign of things going wrong. Unfortunately, the volume dependent companies and those who supply them get hit first and worst. You only need to look at the mess that was Entu and how Epwin’s share price got smashed. It has recovered some of it’s lost ground thanks to that last minute Latium Group deal. Still, that was only one company and look at the damage it caused.

I do believe that certain companies who were perhaps just getting by in the past couple of years have been exposed by this small slowdown. Slow in it’s nature, but enough to potentially pull the rug from under some.

I have heard one or two passing comments from people who believe that the industry still has too many companies given the amount of business up for grabs right now. I tend to agree.

I still think that there is a percentage of companies that either need to be swallowed up by others or will fall by the wayside naturally. These past few months has exposed weakness in some areas and that I think has made certain companies a more attractive acquisition prospect, or has increased the chances of themselves finding worse trouble down the road.

Either way, we’re on a rocky road at the moment and it’s not exactly certain whether every single one of us will make it to smoother travels.

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By | 2017-09-07T22:04:28+00:00 September 7th, 2017|Categories: business, double glazing industry|

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