Insight

As a newcomer, one of my first impressions was of the generally long service of those in the industry. My 15 months exposure seems rather meagre in comparison to the generally more than 15 years’ service of many of my peers. Consequently, my perspective is more of a comparison of the industry with the others I have known, rather than a comparison of 2017 with previous years.

Starting out in a new industry I have spent much of my first year travelling, visiting customers and suppliers. I have been struck by the friendliness and openness of all whom I have met, a very personal industry where relationships really matter. I am also delighted to find active and well supported trade bodies in the BIAFD in the UK and Ireland and EFDA in Europe. I consider active trade bodies a good sign of the health of the sector and vital to representing the industry with government. This is clearly a great industry, you can see that by the long service of most players, it makes the industry seem a little like the ‘Hotel California’ in the song by the Eagles – ‘You can check out any time you like, but you can never leave!’

Looking back at 2017 in the UK we have been coping with the implications of the BREXIT decision. This has created a high degree of uncertainty and created cost price pressure due to the fall in the value of sterling. These issues will follow us into 2018. Even though some progress seems to be being made on moving towards a trading agreement with the rest of the EU, uncertainly remains, which has a negative impact on investment, GDP and consequently market growth.

This leads me to believe 2018 will continue to be challenging in the UK. There is continuing cost price inflation coming out of the Far East driven by steel prices; the need for factories to meet environmental standards; increasing labour costs; and other manufacturing cost increases. An improvement in the sterling exchange rates may mitigate some of these price pressures, but I believe 2018 will continue to see cost price increases and consequently price increases across the UK market.

With continuing price inflation and the struggle to hand cost price increases on, the focus will inevitably turn to managing costs to maintain profitability. When I look at many of our smaller customers in the UK market I am astonished at the inefficiency in process and communication. Many players do not seem to have embraced the tools available to simplify process and communication – there is still widespread use of handwritten faxes when EDI has been around for 30 years. With the cost pressures we are all seeing, we will be pushed to adopt much more digital communication throughout the whole of the supply chain process, a quotation or order keyed once and then transferred between the various parties. This need to embrace digital will be further accelerated by the increasing need for traceability and certification. We can neither afford nor cost-effectively manage these needs without the use of digital technology.

Another trend I believe will be prominent in 2018 is market consolidation. In comparison to many industries I have worked in, our industry in the UK is very fragmented. When this is coupled with an ageing ownership base, and the need to drive cost efficiency, I believe we have a market ripe for consolidation through acquisition. We have already seen some of this in 2017, I believe this will accelerate further in 2018.

In my view, businesses only grow or decline, they do not stand still. At Hexstone we are investing across the business in 2018 to build on 2017 and drive growth. We are increasing the size of our field sales force to build even better relationships with our customers. We will continue to expand our ranges and develop our brands to meet the changing needs of customers. We will also be investing in technology to reduce operational costs, improve communication and improve our service to customers. 

The Chinese say: ‘May you live in interesting times’, we are definitely in interesting times and I am very much looking forward to 2018 and an exciting second year in our great industry.