Structural Economic Barriers or just Teething Problems?
Six weeks after leaving the single market we talk to some of our manufacturers about their first glimpse of the sunlit uplands.
Early days sure, and doubtless most teething problems will be ironed out, but what problems are structural?
We work with around a dozen tanneries who supply us with sheepskin products to our own particular specifications. Most are UK based, family businesses. Some are young upstarts and others have been tanning hides the traditional way for some 200 years.
I spoke with the managing director of one tannery, with whom we have been working since we launched The Wool Company in 2007.
Iconic motor marque trips over car mats
For many years the tannery has been producing sheepskin for a globally iconic motor company. These are the best of the best. No names no pack drill.
The raw, salted sheepskins are sourced from North America for us and for them. These
North American Sheepskins are tanned, dressed and finished over here and then carefully selected and trimmed for their life in a footwell.
Due to stringent quality control many superb skins that don't quite make the grade, so we at the Wool Company buy rejects and offcuts of these
finest sheepskins to produce superb quality
seat pads, and great value luxury
pet rugs (some of our most popular products). Nothing is wasted.
Those that did make the grade are dispatched to Europe to have moulded backings adhered by a leading German plastics company that does this for most top end motor cars. The skins are now the most luxurious car mats you will find anywhere and are returned to the UK to be fitted into the cars. 85-95% of these iconic British built cars are exported.
The tannery has been working with the motor company in this way for many years. The Sheepskin consignments into Europe number around five per week. 2-3 boxes per consignment, 250 consignments per annum. Freight usually costing £20-£30 per consignment, 90-95% would arrive at destination within 2 days and none have been ever been lost.
My friend told me last week that, since 1st January, the consignments are not arriving: -
- ⅓ of consignments have made it through customs in Germany
- ⅓ have been returned to the tannery
- ⅓ are simply "lost"
These are exactly the same items, dispatched daily, varying by colour only. Each consignment is treated differently by customs officials in the bonded warehouse in Germany. 3-box consignments often get split and one box just disappears.
Nobody at the (premium) courier company can say why the returnees were rejected. All documentation appears to be correct. Freight costs are up by 40%.
Production (and export) of these c. £250,000 motors may now be delayed - due to missing floor mats.
My friend feels "we have been hoodwinked" into believing things will be better after brexit, whereas in fact international trade to his biggest foreign market is now "much harder". He had hoped the weaker pound would make his company more competitive into Europe, but he claims the exchange gain is nothing compared to the increased costs, whilst he also complains of new difficulty obtaining from Europe the chemicals essential for tanning, slowing productivity, tying up liquidity. These additional costs and time have, he says, far outstripped any exchange rate gain. He reckons just the car mat business headaches take up an extra 1½ hours per day, equivalent of one full working day per week.
He believes that in due course some of these problems will resolve themselves but worries that in the meantime his European customer will be looking for an alternative tannery on the "right side" of the border.
Out in the cold, feeling the heat
Another of our manufacturers, a 200 year old mill a well known British blanket weaver, also fabricates other textiles as well as the superb natural
pure new wool blankets they've been making for us for many years.
Last week one of the board directors of this 200+ year old family business was telling me about a high tech fire proof textile they fabricate for the interlining in firefighting tunics.
Firefighting tunics were originally made from wool due to wool's natural fire resistant properties. The company now manufactures this innovative fabric in the UK but the clothing is assembled outside both UK and Europe.
The finished items are sold in Germany to firefighting forces in Europe (and around the world).
Because of this and the fact that UK has left the EU, there is a tariff on the final imported item when imported into Europe because it is imported from a Third Country. The tariff is based on the high tech textile as it is the most valuable element of the garment. This means that the cost of the fabric is significantly greater to the customer in Germany, meaning our UK manufacturer is less competitive so the German customer will be looking for alternative options for the garments.
She tells me that, much like the problems the tannery is facing they are experiencing massive delays at customs in Europe for these and other items, despite the fact that all their paperwork appears to be in order and that costs for clearing customs on many items e.g. blanket bags are as much as the value of the consignments, having gone from £40 up to £100, making them completely uncompetitive. Again, we all hope that many of these problems are only temporary and will be looking for updates of the coming months.
I look forward to bringing you more news from our suppliers over the coming weeks and fervently hope it will be more positive!
