Not all doom and gloom

Martin Johnson, MD of Nico Manufacturing, examines the positives to come from the recent economic downturn for the UK hardware industry

Although many suppliers, fabricators and installers in the UK window industry are undoubtedly feeling the effects of the recent economic downturn there are some positive signs for UK hardware manufacturers.

After a period of severe pressure on margins due to rising steel prices, strong competition from subsidized far eastern exports and a declining marketplace, the UK hardware industry has certainly had a fairly difficult time in recent years. And, as a result, we have seen many suppliers source some or all of their range from the far east.

More recently, however, with the reduction in subsidies from the Chinese government, the price differential has begun to close, and this - along with problems of product specification, quality, delivery and service - has resulted in a move back towards more local supply.

In addition there are aspects of the declining economy that are making UK manufacturing more competitive, especially the weakening pound against the dollar.

The Dollar Effect

A weaker pound makes all imports, including those from China, more expensive. China trades with the rest of the world in US dollars so the rapid decline of the pound against the US dollar in the last six months has been very significant.
A current rate of around 1.50 US dollars to the pound rather than the 2 seen earlier in the year equates to a real increase of over 33% in the cost of imported goods.

The window industry is just starting to see the effects of this, with several hardware suppliers introducing price increases in the region of 15-20% for imported items.

There is a risk that the Chinese government may try to offset to the changing exchange rate with increased levels of subsidies but with WTO (World Trade Organisation) regulations forbidding export subsidies this is unlikely. In fact, the pressure is for subsidies to continue to reduce.

Many economists consider than the 2:1 dollar pound exchange rate operating prior to the current recession is too high to sustain, and that a rate of between 1.40 and 1.60 is the natural level. Certainly, if the exchange rate is averaged out over the last fifteen years, the average is 1.66.*

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* Source: Ratesaver at AIB Global Treasury Services, 10.1993-11.2008.

If the exchange rate remains at about 1.5:1, and Chinese subsidies remain at the current level, British hardware is now and will be much more competitive - both at home and abroad.

The Green Effect

The 'Dollar Effect' is not the only reason for the Window Industry to choose British hardware. The drive to reduce carbon emissions - by the government, British industry and individual businesses - is bringing the environmental costs of manufactured goods in a sharper focus.

It is a fact that the carbon footprint of a Chinese manufactured product is likely to be significantly higher than its UK or European equivalent.

At Nico Manufacturing, we have recently commissioned an independent report into the environmental impact of producing two hardware items: a mild steel butt hinge and a stainless steel friction hinge, in the UK and China.

The results showed an increase of 71% and 78% in carbon emissions respectively if the items were produced in a factory in China rather than at our factory in Essex.**

** Xanfeon Energy & Environmental Services examined two products from the Nico range: the 7740 Stainless Steel Friction Hinge and the 4515 Steel Butt Hinge. They analysed the carbon footprint of each product when produced in our factory in Essex or in an identical operation in China. Results were calculated as CO2 (carbon dioxide) and CO2e (carbon dioxide equivalent, including other greenhouse gases such as methane and nitrous oxide) emissions per unit (grammes).

Conclusion

Although times are really tough, the economic downturn and the resulting decrease in the strength of the pound, has leveled the playing field for the British hardware manufacturer. We have always been able to offer customers the quality products and service they prefer, and with today's more competitive market, I am sure that many customers will take another look at British made hardware.

For more information, please contact:

Martin Johnson
MD
Nico Manufacturing Ltd
Oxford Road, Clacton-on-Sea
Essex CO15 3TJ
Tel: (01255) 422333, Fax: (01255) 432909
E-mail: martin.johnson@nico.co.uk
www.nico.co.uk