John Duffin comment: BMN Leading Lights – Brexit Special

John Duffin, Managing Director Keylite Roof Windows is BMBI’s Expert for Roof Windows.

Whether we have a ‘Deal’ or ‘No Deal’, the volume of almost-daily statements, debate and confusion emanating from parliament is sapping both consumer and business confidence. The UK economy will continue to feel the effects while this uncertainty remains. An exit from Europe will have clear reverberations and, regardless of how we voted in the referendum, we must all be prepared for the fallout.

Our main concerns for UK construction include a lack of skilled labour, which will be further compounded by the necessity for ‘settled status’ for non-British employees; and the effect of uncertainty on sterling, which coupled with a possible imposition of tariffs, may affect profits. Perhaps the biggest impact on the construction industry will be through the supply chain. The challenge for the construction industry, which relies on products supplied from Europe, will be to source equivalent supplies from the UK – or face long border delays and tariffs.

A ‘No Deal’ scenario would be particularly difficult for roof windows, due to the significant cross-border sales. Regardless of brand, most roof windows are produced in Poland, so all leading manufacturers could encounter problems with the movement of product across UK borders.

However, we expect the market to grow strongly in 2019. Housing demand is high, as a growing population, changing demographics and decades of under-building have left us short of living space.

After the financial crisis of 2008 we saw the switch from ‘move’ to ‘improve’. Homeowners, unable to move, invested time and money in improving their living spaces. If this trend were to be reinforced by the outcome of Brexit, the combination of new build and RMI projects would fuel growth, allowing the roof window industry to grow, whatever the fallout.

Given that we manufacture in Europe and our main sales territory is the UK, Brexit will no doubt have an impact on our company. Keylite is continuously surveying market conditions to ensure we are as prepared as possible for Britain’s exit from Europe, and over the past 9-12 months we’ve taken a variety of steps to ensure it’s a smooth process.

Firstly, by moving to a new warehouse in Burton, we’ve increased our stock holding capacity in the UK by around 25%. We’re currently holding 6-12 weeks of stock (depending on SKU) and have the potential to increase this again by utilising additional racking space in our new facility.

Since early 2018, we’ve also been making use of container logistics on short sea crossings. This is very efficient and has provided us with additional options to avoid potential bottlenecks at Dover, allowing us to shield customers from potential delays in delivery of our products.

With regards to currency movements, we hedge to smooth or avoid unexpected foreign exchange risks. While this is the biggest potential problem for Keylite from Brexit, aside from falls in consumer confidence, fluctuations in sterling affect all roof window manufacturers similarly.

One of the main concerns for most UK manufacturers is having access to enough skilled and unskilled workers post-Brexit. We are fortunate to have our manufacturing facility in Poland with a strong workforce, allowing us to continue producing at the same rate as now. Although the whole industry faces great uncertainty, Keylite is confident we’ve taken all reasonable steps to futureproof our business and continuity of supply.

Read the full report here.

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