In the post-Brexit landscape, the rise in costs for raw materials is very much the reality for manufacturers thanks to changing exchange rates. Cabinet Maker finds out from British Furniture Manufacturers (BFM) which areas have been most greatly affected.
Whilst the initial panic surrounding the UK’s decision to leave the EU is slowly dying down as the country realises that it will in fact take some time for the greatest changes to take effect, one difficulty which became immediately apparent to the furniture industry in particular was how the drop in value of the pound would affect those manufacturers sourcing raw materials from international partners.
A number of companies that Cabinet Maker has spoken to have put various measures in place to protect themselves, at least in the short term, from increasing their stock holding pre-Brexit, to reaching agreements with their suppliers. But which materials have been affected? Have some more than others? Mike Dimond, the BFM’s employment and membership affairs director has provided some insight.
Mike recently investigated 37 different materials or feedstocks which determine prices and are typically supplied to furniture manufacturers. These included: board (of various compositions), foam chemicals, fibres, hides, steel wire mesh, hardwoods and softwoods.
The data revealed that over the year, many material prices have risen noticeably, while recent month by month changes reflect the fall in the pound. For example rates for a 40ft shipping container from China to Felixstowe have risen by 29% since July 2015.
Said Mike: “We have seen price increases ranging from 10% to 50% in recent months. Cotton fibres for upholstery, for instance, rose by 28% between June 22 (pre-Brexit) and August 17 - a combination of rising prices generally and the weakened pound. We also discovered that toluene diisocyanate (TDI_ – one of the main chemical components in foam - rose by nearly 50% between the end of January and the end of July this year. Whilst, again, this is partly due to the weakened pound, another factor was lack of supply because of summer plant maintenance.
“We’ve also seen 16mm melamine-faced chipboard, sourced from Germany and priced in euros, increase in terms of sterling by nearly10% between June 22 and August 24. Again this has been driven mainly by the weakening of the pound, as the actual price of this product in euros fell by 1% in that period.
“We would advise companies to look around for best prices on materials and take note of any significant falls in the price of products that have occurred in the last year or so. They can then use that in knowledge in negotiation.”
At British Furniture Manufacturers (BFM), the association’s commodity price tracking system was used to gain this insight, as Jackie Bazeley, BFM md explained: “Our price tracking service provides the real cost of raw materials, rather than what users have been told has gone up in price, putting buyers in a better bargaining position. It also alerts management teams to overall production costs as a result of rises and therefore any potential need to pass increases onto customers.
“It allows users to track prices over a monthly, and yearly basis, an increasingly important tool for many manufacturers. Data is available on more than 220 items covering abrasives, board, chemicals, container rates, energy and fuel, fibreboard, fibres, fittings, foam chemicals, fittings, glass, UK performance indicators, leather, logs, metals, packaging, plastics, shipping, silk, spandex, steel and steel wire, timber and wood, veneer sheets and wood based panels, waste, waxes as well as wool, from all over the world.
“The information on our systems is updated on a weekly and monthly basis, depending on the item. Imported products, which are in other currencies, are automatically translated into sterling, so that we can see the price in the original currency and also the effect of currency movements.
Continued Jackie: “With the current currency fluctuations and increases on raw materials and import rates, our commodity pricing system is an increasingly important tool to monitor the cost of supplies. The price items within the system were selected by staff and members in a consultation exercise.
“Our service provider delivers a comprehensive price system across a whole range of products. It is recognised as the principal independent source of intelligence on commodities and raw materials, specifically designed for purchase managers, and is used by some of the country’s largest retailers, such as Tesco. We have offered our price tracking service for five years now, and recently noticed a considerable upsurge in the number of members accessing information following the Brexit vote.”