I know we’re all nearly done for Christmas, and I promise I’ll get more festive in my next posts, but there is something important to address and that is the imminent first quarter of 2019.
Not to sound dramatic or anything, but the first three months of next year could be an absolute car crash.
Not just Brexit
Before I explain why, the situation I predict we may find ourselves in cannot be blamed solely on Brexit alone. Before we descend into another Brexit argument.
Here’s a word we’re going to hear more of next year: challenging. This is the word carted out in public statements when business like to put a shine on the reality that things aren’t going that well. Q1 of next year I think could be a massively tough one for our sector. I’ll attempt to concisely explain why.
Brexit if of course part of the overall sentiment. We still don’t have an idea of the final outcome, and at the time of writing a no-deal scenario is actually the most likely outcome now. I’ll delve into my thinking on that in another post before the year is out. Companies both within and outside of the UK have been holding back on investment and spending decisions, including within UK fenestration, until some kind of clarity is provided. Instead, the Government is now asking business to make preparations for no deal with 100 days to go. Not exactly a long period of time to get ready is it. Personally I don’t believe a no-deal is all that disastrous. I’ve actually seen very little information to prove otherwise. But I’ll park that subject for now.
The high street is a good bell weather of the state of the economy in the UK. Unfortunately, you might have seen how dire things appear to be right now. ASOS issued a profit warning which not only saw their share price dive 40%, but also dragged the rest of the retail sector down with it. We have known for a while that the retail outlook looks grim. Only the other week Sports Direct chief Mike Ashley warned that unless something radical happens now, the high street is going to be decimated. Speaking from personal experience, I was in London this past weekend and went to Oxford Street to do some shopping. Considering that this was the second to last weekend before Christmas, it was surprisingly quiet on the streets and in the shops. If London was this quiet on a major shopping weekend, then other areas are going to be the same or worse. Not a good sign.
Then there is the global outlook. China is now undergoing sustained and fairly robust slowing of their economy. China is the world’s factory. If they’re slowing we know we have a problem. Growth in Germany actually contracted 0.2% in the last quarter. Italy contracted 0.1%. In fact Eurozone growth for the last quarter was only 0.2%. The UK’s was stronger than that. What’s worse is that many economists are now predicting that America is going to experience a sharp decline in growth in 2019 as the rest of the world appears to be entering a slow period. As the saying goes, when America sneezes, the rest of us catches a cold. You can see signs of this in the volatility in the stock markets in recent weeks. There’s a lot of selling right now, with investors cashing in now before any further declines occur.
Economic cycles run roughly every ten years or so. The last recession was in 2008, so we’re about on time for things to start unravelling again. With or without Brexit we would have always run into slowing economic activity around this time. Brexit is just another issue to work into the wider global picture.
For the window industry, this comes at a bad time. The end of the year is always quiet. Some installers will have fitting pre-booked for 2019 already, which is great. But if we have a quiet January and February in 2019 that work will quickly run out. The other key factor here is consumer confidence. I know a few people out there believe that some home owners may be sitting on their quotes for home improvement works until they feel a bit more certain about where the UK is heading. So there could be a lot of hidden volume out there, but if people don’t feel brave enough to part with their money then those quotes are useless. If consumer confidence collapses in the next few months, which I’ll be honest looks like it might well be doing, we’re going to be in for a very rough ride.
Uncertainty is the worst thing you can have, be it for business or for the general public. When it comes to Brexit, it may well have been better to declare a no deal a long time ago rather than leave it 100 days to go before everyone is asked to make arrangements for such a thing. At least that way people and businesses would have had time to adapt. For me, a muddled deal with the political union was always going to be a struggle, as getting it approved through Parliament was never going to please a majority, as we are seeing now. So it should have either been out totally or remain in. Give clarity one way or another and then we could have adapted a long while ago. But we are where we are.
The mood music I am hearing from inside and outside the industry doesn’t sound good right now. Of course I would love to be proved wrong and we all hit January with a ton of sales and we’re all making money. But it does feel quite a bit like the early part of 2008 when everything was starting to unravel. Perhaps not as dramatic, but the signs are there.
Don’t retreat from marketing
Well that all sounded a bit gloomy didn’t it? Sorry about that. But I’m only making a judgement based on the data, information and personal conversations I’m having.
However, we’re not powerless to the direction of travel. Quite often when things start to go negative businesses, especially in our industry, tend to cut back on things like marketing. That makes absolutely no sense. Why withdraw even further from promoting your own brand and name as the industry goes quiet? It’s the equivalent of shooting yourself in your left foot just as the right one gets shot. The very first thing we should all be doing is increasing our marketing. Making ourselves been seen further, reminding people that their homes will still need new windows and doors and that requirement hasn’t gone away just because the economy might be heading for a slow patch.
The same can be said on the B2B side of things in our industry as well. Why would a fabricator cut back on the very activities that keep their name in installer’s minds? Fabricators still need bring installers on board. Competition is just as fierce in bad times as well as good, so why back out further of a quieter market by cutting back on marketing? It makes no sense.
Whether you’re B2C or B2B, we all need to be upping our marketing in the first quarter of 2019. Home owners are likely to withhold making a decision on the bigger home improvement projects until after March 29th. We can’t wait that long so we need to be in people’s faces letting them know that we’re all still here and their projects still need to be done. If companies are not proactive from now until March then we could see a pretty baron period for the sector.
There will still be plenty of growth opportunities in 2019, like lanterns and flat sky lights, composite doors, residential aluminium, flush windows etc. These are all still desirable products for home owners. These should still be pushed and companies should still plan for growth next year. No reason to be negative for the sake of it. We need to be head strong and knuckle down.
The start of 2019 could be a hell of a bumpy one!
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