The second quarter of 2002 has been marked by a continuing deterioration of the UK wood machine market, described by one contact as the latest “sorry chapter in a long, drawn-out process”. And the problem is not affecting only UK firms: “My suppliers abroad all say the same thing; it is at least Europe-wide.”

Another commented: “The market is OK, but it’s not great when the pound goes down against the euro.”

Most pundits say the market was fairly buoyant until January, but has flattened out since. While some firms predict that they will eventually generate roughly the same turnover this year as last, persistently low demand for machinery as the market enters the third quarter is causing concern.

“I don’t think there is a tremendous amount of demand,” said a contact. “If you wanted to give your machines away, then you possibly could, but then nobody makes a profit.”

Another said he could understand why people might not want to extend themselves in the current climate – and why some are reluctant to pay cash and “ruin the cash flow”. “I wouldn’t buy a machine, personally, I’d lease it,” he said. “You can have a £75,000 machine for just over £2,400 plus VAT per month on a 3 + 33 lease and you have the latest equipment, with very high efficiency.”

One contributor summed up the situation: “If I was reliant upon the woodworking industry for 100% then I would be having a lot of difficulty. It’s not a zero on the wood side but it’s not as buoyant as it has been in the past.”

Little evidence

Another contact noted a great deal of interest in machinery from buyers but little evidence of any will to actually buy.

Machinery buyers were berated by a contact who said he was exasperated by the number of people coming to him with unrealistic budgets. “People come in and say they have budgeted £40,000 for a particular machine but the strange thing is they do it without actually asking what a machine costs. You tell them that it’s going to cost £50,000 and they tell you that they only have £40,000. Random numbers by financial directors!”

The advent of the euro has made a big difference to some wood machine suppliers who are still celebrating the demise of the exchange-rate led competitive advantage once enjoyed by their competitors.

However, despite widespread willingness among companies to work in euros, some agents for overseas manufacturers continue to present their prices in pounds in order to avoid souring relations with buyers. “I’m not a big lover of saying to a man ‘the euro has fallen so you owe me another £2,222’, because that tends to cause an argument,” remarked one contact. “

Waiting for opportunities

Some machinery buyers are clearly waiting for opportunities offered by the major exhibitions scheduled for later this year although, with inflation hovering around the 1.8% mark and the possibility of borrowing at interest rates as low as 4.5%, some sellers seriously question the wisdom of this strategy. That extra few months’ wait, they argue, could mean an increase in price of several thousand pounds, which would eliminate any perceived saving for the customer. There are also enterprise grants of up to 15% available in some regions, which machinery buyers are failing to take up.

In contrast to the big kitchen makers in the UK, said the contact, European furniture manufacturers had been investing steadily in new machinery over the past decade. While this comparative stasis on the part of UK firms has perhaps helped to stabilise the market, it means that European companies are increasingly able to come in at lower costs, higher output and more flexibility over order volumes.

“Ask yourself this – why is it that B&Q buys Italian flat-pack kitchens?” he said. “We are the home of flat-pack and we have a major shed importing them. The larger manufacturers can do something about it but they are going to have to put their hands in their pockets, rather than keep counting the profits. Sooner or later one of the big UK manufacturers is going to have to break ranks and invest.”