Yesterday I wrote how there is an impending price war of epic proportions headed our way in the coming months. I don’t think I was exaggerating that in any way. The industry’s suppliers are going to have to decide in the coming days and weeks whether to absorb any cost increases that have resulted from a drop in the value of Sterling after the Brexit vote.
These increases are coming to companies who purchase their raw material products from outside of the UK in currencies other than Sterling. Although the pound has dropped a little in value against the Euro, it is against the all conquering dollar which it has seen the steepest decline, and will be the cause of the majority of price increases for suppliers.
However, there is a split opinion from the industry as to whether to pass these increases on further down the supply chain.
We will find in the coming days and weeks a flurry of statements and press releases from suppliers outlining their positions with regards to price increases. One of the most talked about companies in the industry right now, Brisant, creators of the highly regarded Ultion door cylinder, released a statement explaining their position on price increases:
The pound has fallen sharply after the Brexit vote, so imported components now cost more. Last week, we were notified that the costs of our components are being increased as a result of the exchange rate.
We believe that passing on these extra costs immediately will only make things worse for all of us. We hope business will play its part and delay these increases for as long as possible.
Brisant are absorbing the 10% impact on our selling prices until October in the hope that exchange rates will have returned to normal, and we’ll have done our small part in helping industry ride out the disruption.
If the situation hasn’t corrected itself by October the charge will be a currency surcharge that will be removed as soon as normality returns!
So, no price increases from Brisant to their customers until October, where they hope that the currency conditions have returned to normal.
This statement is also a fairly firm nudge to other suppliers in this industry that may be considering raising their prices. Brisant’s statement shouts loud and clear to the industry to take this on the chin, at least only for a relatively short period of time, to allow for Sterling to recover and normality returns.
They recognize that if every single supplier passed on price increases of 10% to their installers, the prices of windows and doors would skyrocket which in turn would only serve to kill demand from home owners, which equates to less orders being sent to suppliers. It would start a vicious circle that would be hard to recover from.
The holding off of this increase isn’t permanent however. The statement does go on to say that if the situation in currency markets hasn’t rectified itself, the increase would then become a currency surchage until normality returns. But even then, there is a promise that this in reality is only temporary and will only be in place whilst Sterling remains low.
Hope for October
Brisant isn’t the only company to have mentioned October as a potential date for when Sterling may return to normal. Solidor have mentioned a couple of times of their expectations of Sterling returning to normal by then. There was another as well but at the time of writing my memory has failed me on that name of that business!
Not only that, Roy Frost, MD of Deceuninck UK, in an exclusive piece for DGB has said that it is business as usual at the company.
However, there have been some notable companies who have decided to quickly pass on these increases, namely Assa Abloy, the world’s biggest lock group, and a number of composite door companies. Personally I think they have been a bit quick to pass on what are pretty steep price increases, but I don’t really know the structures of their businesses so I guess there is something I may not know which has caused them to pass them down so swiftly. Some may argue for a more sinister cause.
But make no mistake, the firing gun on this price battle has been fired, and it will be the companies who are lucky enough not to suffer from any price increases or those absorbing them that will be shouting the loudest in the coming weeks. They will be hoping that potential new customers will hear this and turn to them to ensure their own ships are kept steady.