Respondents to British Furniture Manufacturers’ (BFM) last Trade and Price Trends Survey in April expressed a high degree of confidence in market growth as the economy emerged from renewed lockdown.
Despite furniture shops having been shut and a lack of contract work in previous months, plus mounting concern in the sector about rising costs, 84% stated they were more upbeat about the general business situation than they were at the time of the previous survey last October.
Latest figures from the Office for National Statistics (ONS) posted on the BFM website (www.bfm.org.uk) indicate that manufacturers’ optimism was justified.
The ONS reported the industry’s turnover in April at £648m, rising to £677m in May, twice the total for the same month in 2020. This gave a first five months’ turnover total of £3.3bn. That was still 14.7% below the 2019 figure of £3.86bn, but 21.6% ahead of the £2.7bn for the same period last year.
Most recent ONS figures reported by BFM show the recovery of UK furniture manufacturing strengthening further, with turnover in June at £779m. That was 65.2% up on the same month in 2020, 9.6% up on 2019 and, said the BFM, the highest June sales total since records began in 1998.
In the organisation’s latest survey, 63% of respondents said that trade was better than the same time in 2020 and, further underlining their positive outlook, 42% expected to recruit new staff in the next six months.
Output over the previous six months also beat expectations, according to 69% of companies, while 40% said new orders were better than anticipated.
“Both these measures of performance are expected to improve still further as we go through the summer months,” said the BFM.
The cloud to the sector’s silver lining is the steeply rising price of raw materials.
“It is a major issue for the industry with reports of increases of up to 20% for board and springs, 30% for plywood and steel, 15% for timber, 25% for assembly parts and 50% for foam,” said the BFM.
The vast majority of furniture makers, it added, had no choice but to increase their own product prices as costs and overheads rose.
“A balance of 94% of respondents in our survey were doing just this and, in general terms, prices were increased by more than we’ve seen in previous surveys,” said the BFM. “Some 74% of the sample reported raising prices in the range of 5% and 10%. Despite this, margins again were eroded, with a balance of -22% stating that they had declined since October last year. The majority also reported other cost increases, which would have impacted on profits. In spite of furlough, a balance of 67% reported increased labour costs and 79% overheads.”
The summer has seen the cost of furniture makers’ materials and fuel continuing their upward trend.
“In July costs climbed to 15.8% higher compared to the same month in 2020, while in June the same comparative figure was 12.3%,” stated the BFM. “We’ve been reporting large materials price rises now for some time, with some items up 60% [on last year] due to demand and supply shortages, and the latest BFM Prices Report for August shows little sign of this trend abating.”
To meet their increasing bills, it said, it seemed inevitable that UK furniture makers would need to raise factory gate prices, which were up 2.3% in July, still higher, leading to further consumer price increases.
“The retail price of home-produced and imported furniture in July rose on an annual basis of 6.9%, up from 6.6% in June,” said the BFM. “This represented the highest monthly increase since September 2017.”
The better news on costs, according to the August BFM Monthly Economic Review from managing director Nick Garratt, is that, while supply disruption and labour shortages, exacerbated by the ‘pingdemic’, were expected to continue in the near term, global supply capacity is forecast to recover later this year.
Looking forward, the BFM also identifies a threat to the sector from consumer spending “rotating back to social and experience-based activities”. This, it says, “is likely to put a brake on demand later in the year”. Currently, however, the furniture industry upturn remains robust.
Furniture retail sales growth slowed in June, with the total up 29.9% on the same month in 2020, compared to increases in April and May of 408% and 275% respectively on the same time last year. But, said the BFM, the underlying picture remained strong. June sales still totalled £1.469bn, which was 7.3% better than in pre-pandemic June 2019 and the second highest spend since December last year. At over £7.2bn, sales for the first six months of 2021 were virtually on a par with 2019.
“The industry continues to benefit from strong demand with strong retail sales volumes reflecting the easing of coronavirus restrictions,” said Mr Garratt. “The home continues to be a major beneficiary whilst restrictions on travel and experiences limit consumer spending in these areas.”
To give the sector’s recovery added momentum, he added, the BFM is putting British furniture “talent and skills into the spotlight”, with a new facility in its website directory section enabling members to create profile pages to showcase their business and products.
“It’s more important than ever that we engage in the digital marketplace and this platform is crucial in connecting with consumers and getting the ‘Buy British’ message across; promoting the quality, safety, comfort and professionalism that is associated with British-made goods,” said Mr Garratt.
