We’re just 31 days away from the end of the Brexit transition period and there is still no clear sign that there is going to be a breakthrough in trade talks between the UK and the EU.
Each week we’re told that this is the last chance for talks, then they get extended, which no apparent progress, despite the spin that the deal is “95%” there. There are no doubts on both sides that even if a deal were to be done, it would be a skeleton of a deal to be built upon in the years to come, and that its likely too late to avoid disruption no matter the outcome.
This matters to our industry. As we start to wave goodbye to an awful year, it looks like we could still be in for a rough start to 2021 on the economic front.
The sticking points
From the various reporting over the last few weeks, the major sticking points to a deal are over fishing rights, state aid and competition rules. As each week passes without a deal it’s those same three points that come up as the problems. It will take another huge post to explore why those three points are pertinent to issue.
There are no signs of an imminent breakthrough in talks, and Ministers from Government over the past few days have been dropping language into interviews that might appear to be laying the groundwork for a possible no-deal by the end of the month.
Both sides have also expressed concerns that with only a few weeks left in the transition process, we’re already way past the point of being able to avoid disruption whether there is a deal done or not. I would tend to agree with that statement. Any agreement would have to be ratified by this country and the other 27 EU nations. If that were to happen it has been suggested that the EU might need a rapid emergency meeting either just before Christmas or in the days between Christmas and New Year. At that point there is still likely to be huge confusion on both sides as the terms of any new deal will take time to understand and bed in.
As a result of the lack of a deal, companies across all sectors have been stockpiling goods for weeks, if not months, to secure them at current prices and to ensure goods can be sold after January 1st. But, many companies, including those in fenestration, burned through their original Brexit stockpile to service high levels of demand during the summer. So for many, they will be stockpiling from low levels and perhaps won’t have as much stock as they would have liked.
What happens in the next few weeks matter to fenestration.
For weeks now ports around the UK have been buckling under the traffic of container ships as the country seeks to import as much as it can before the end of the transition period. It has resulted in some ports turning away ships send sending them back to Europe where their goods are offloaded and sent back to the UK in smaller ships which could get entry to UK ports. That high level of traffic doesn’t look set to drop any time soon as Christmas and the pandemic continue to fuel consumer spending.
The issue for fenestration is that many component parts are made in Europe and other parts of the world. If we can’t get easy access to our goods and demand becomes a problem, which is a possibility, then prices are going to rocket up again. If there is chaos at ports resulting in epic delays to deliver goods then ours, as well as many other sectors, could face a period of weeks where access to products is very difficult. I would hope that both sides have put in place some contingencies to alleviate some of the disruption. But as we’re already seeing at ports in this country, stockpiling is already exposing the weaknesses there.
So just as we’re leaving the worst year in decades for us all, there is a distinct possibility that we’re going to lurch into another crisis at the start of 2021. Any problems should smooth out over time, maybe a month or two, as the new lay of the land is known and new processes become smoother. But that takes time and as I said earlier, deal or no deal, I think there is going to be some level of disruption before we get used to the new normal. For what its worth, I think even with a deal prices are going to go up anyway.
For me, this reinforces the argument that this country, indeed any country, should have a strong domestic manufacturing sector. To be so self-reliant on overseas for imports, conceding control of your own situation, puts us at the mercy of external circumstances. We saw this early on in the year when China had to shut down to contain the virus and fenestration hardware was becoming scarce. Had more been made here and our own supply chains secured then perhaps we wouldn’t need to be stockpiling so much or worrying where our hardware was coming from if it get stuck at ports.
As for 2021, I think we can expect a number of price increases across the board. Glass, profile, hardware will all go up during the course of the year. We’re going to have to do our best to navigate around that as I think next year could be more challenging on the economic front than we might think. A messy end to the transition period will shave 2% from GDP next year according to the OBR which will significantly weaken then recovery from the damage done this year. A high unemployment rate will be a drag overall and at some point the Government is probably going to spell out how to pay for the record amount of borrowing this year.
So whilst we’re all counting down the days to Christmas and some well earned time off, we perhaps should also be preparing for a rocky start to next year too.
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