The UK economy has been through a very tough time in the past 12 months, which has affected every business in some way. Despite plenty of talk of green shoots, economic recovery still seems to be some way ahead of us, with the problems that have built up through an extended boom phase of the economic cycle expected to take years, not months, to resolve.
Amidst this, the timber industry has faced some significant challenges, not least in the form, firstly, of continued decline in the sale of construction products. Construction has been at the forefront of the recession and is showing few signs of recovery at present. Secondly, timber continues to see tough competition from steel and concrete, increasingly billing themselves as sustainable construction materials, both of which have strong legacies of marketing and distribution to constructors. Thirdly, timber has been subject to volatility in its prices for some time, adding an additional layer of complexity to UK timber companies in respect of margin control and stock purchasing.
However, timber is an important part of the future UK economy – it is used for a broad range of products that grows ever wider with the popularity and ‘fashionability’ of wood. It contributes to the carbon mitigation targets as defined internationally and provides an economic return throughout the supply chain via the growing, processing and distribution of timber.
Bank support
Of course somewhere along the way all timber businesses will have a bank in support of their activities. And within the commercial banking sector, the relationship with clients has never been more important, with the key focus at the current time being cash.
In today’s market businesses are looking harder at ways to manage their cash flow effectively, exploring areas that may have been overlooked in better times and this will undoubtedly create a new model for doing business generally and for bank/timber company relationships that will survive into the future.
Recently, for instance, we’ve seen businesses:
• offering early payment discounts to customers to bring cash in faster, albeit at a slightly reduced level;
• taking proactive steps to discuss payment terms with suppliers rather than simply holding back payments, eroding goodwill and achieving only a few days’ grace;
• using the dialogue that can be had with HM Revenue & Customs to reschedule payments to take pressure off cash flow;
• negotiating terms with landlords who are acutely aware of their own cash flows and the importance of keeping properties occupied even at a renegotiated rent.
At Barclays Commercial Bank, our immediate priority is to support clients through recession, but with a continuing emphasis on building long-term relationships. We see this being achieved in a variety of ways.
Industry specialism
A key focus is on industry specialism. Around eight years ago clients indicated that they not only wanted their bank to understand their business, but also the sector in which they operated and traded. We subsequently aligned relationship managers with particular industries, including the timber sector. We have done this across the entire country with the aim of creating a better understanding of the client’s banking needs and constructing the right solutions to meet them.
The second strategy for reinforcing industry specific relationships is ‘Connect’ events, started as part of our Turning the Corner initiative to help businesses cope with the recession. These feature a keynote speaker, an economic overview, an exhibitors’ area allowing clients to promote products and services via a networking exhibition, and drop-in clinics with, for example, an international trade team, cash management team and HR specialists. The idea is to give clients opportunities to widen their networks, share tips and do business together, to market their services or product, network with peers and to speak to experts on current market issues, such as supply chain and cash management.
Recession continues to bite, bringing plenty of challenges to the timber sector. However, our experience is that the industry is resilient, has fantastic businesses operating in it and offers unique sustainability that makes it vital for the UK economy going forward. We aim to continue to build up our connections with timber companies as part of a developing culture of deepening relationships between banks and their business clients.
