As with any major budget announcement, it takes a day or two for the dust to settle and the full ramifications of the policies announced become clear. Media outlets and financial institutions have been pouring over the figures and information, and the general consensus for the outlook for consumers and living standards isn’t looking great.
UK GDP will remain during the forecast period. But with inflation also predicted to be higher than that growth and higher than wage growth, there are some worrying predictions coming through on living standards and disposable income. As an industry which is placed in the “big ticket” bracket, this is something I think we should be concerned about.
Disposable income falling
If you take what the media says about the UK economy seriously, then the outlook, in the words of politicians, is “challenging”. In plain speak, rough. According to figures worked out by Bloomberg, the UK is about to have the largest living standards squeeze in more than 60 years. By 2022 the UK economy is forecast to be £42bn smaller than predictions back in March.
It has also been predicted that wages won’t rise to pre-2007 crisis levels until at least 2025. And perhaps the absolute killer blow and the figure the window and door industry should be most concerned about is that average annual income is set to be at least £1030 lower by 2022 than previous forecasts. To compound that, incomes are predicted to fall for 19 straight quarters from 2015 to 2020.
£1030 is the best part of a quality entrance door or a couple of windows. This should be of concern for the window and door industry in this country. Like kitchens, holidays, cars and other home improvement works, we are classed in the “big ticket item” bracket of consumer spending. As we all know, when things start to get tight, it’s the big ticket stuff that gets put down the list of priorities for home owners and consumers.
When times are tight, priorities turn to things like food, fuel, mortgages and other bills. Luxuries get canned and any major investments in home improvements become far less important. If you’re a home owner that is finding things tight, you can understand why.
But, in the interests of balance, the forecasts from the OBR up to 2022 take into account a “neutral” effect of Brexit because they admit they simply do no know what it’s actual effects are going to be. So anything predictions after 2020 should be taken with a pinch of salt.
Still, to think that we’re not going through a squeeze and that squeeze is going to get worse before it gets better would be naive. As an industry, this is the time we have to get our 2018 plans in place and have to be very much on the proactive front foot.
Things the window industry can do
The last time the UK economy took a hit was the Great Recession a decade ago. That was a bloodbath for the window and door industry which saw a lot of companies go to the wall. With UK GDP growth still forecast, just not above the 2% levels, I don’t think we’re anywhere near those disastrous conditions.
But, that doesn’t mean the window industry should be complacent. Consumer confidence is key in our sector, and if the living standard squeeze hits hard, that confidence is going to drain away. So, the industry needs to be on the front foot to make sure that any negative effects on our businesses are as limited as possible. There are a number of things we can do.
First, increase marketing. When things look like they’re about to go south, it’s tempting as a business to cut back on spending on all sorts of things, including marketing. In fact, it is marketing and advertising that is arguably the most important thing to focus on in leaner times. Remember, people won’t just rock up to your door and hand over their money. We all need to get our names out there to the buying public and give them as many good reasons as possible to buy our goods. It is in times like these where people need more persuasion, a stronger reason to buy something.
Secondly, streamlining. We have to take an inward look at our companies and identify where we can run our companies better. Are our IT systems as good as they can be? Are we utilising cloud-based systems as best we can? Does our marketing need updating? Are we generating leads in the right ways? What waste can we cut out? Can we change energy suppliers to find a better price? Even the smaller things like stationary, food and recycling are areas where companies can save a few quid here and there.
Third, diversification. I know that as an industry we’re already struggling to keep up with the pace of change and evolution of our products. But, there will always be new niches that pop up with consumers and that’s no different in the window industry. We have to be ready to pounce on the next big growth market. We did this during the Great Recession and some companies came out the other side looking very different but also very profitable. We have to be ready to do the same again.
Fourth, become more productive. I wrote yesterday about the productivity problem this country seems to have in comparison to others. It has been one of our biggest barriers to growth for years, well before Brexit was even a word. So, during this upcoming period of slow growth, one of the biggest things we can do as an industry, and something we are in total control of, is to become more productive. Do more per hour. Make more per hour. Get more done in the hours we work per week. Only we can influence that, and if we do, we might start to see us proving those grim forecasts wrong.
The outlook doesn’t sound good right now, but there are tools at the disposal of the window industry to ensure that any bumps can be smoothed out. Brace yourself though, it’s going to get a bit rough. Maybe.
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