Is your current supplier a zombie?

By Martin Nettleton, managing director, Euroglaze

The most recent research from Insight Data suggests that there were 35% fewer PVC-U fabricators in the UK in 2021 than there were in 2011 (a decline from 1860 to 1195). There’s no single explanation obviously; some have switched to buying in, some have merged or retired and there have been some high-profile failures as well.

Capacity in the market hasn’t fallen but, for installers, the result is obviously less choice and a sense of reduced competition amongst those fabricators who have survived. That was certainly the case in the immediate aftermath of the 2020 lockdown and to a degree ever since, with a number of big PVC-U trade suppliers actively turning down new business.

Some of these fabricators will have made a conscious decision not to increase capacity while the market was uncertain, or simply cherry picked the customers they deem to be most profitable, but I suspect others fall under the definition of ‘zombie businesses’ – effectively carrying so much debt that they have nothing spare to invest or grow even if they wanted to.

R3, the UK’s insolvency trade body, estimates that up to one in five UK businesses can be defined as ‘zombies’ – neither dead nor alive. All the cash they generate goes to paying debt interest, so they have no way of ever reducing the debt itself.

Bounce back loans and CBILS are at very low interest rates and banks are much more reluctant to call in loans than they were before the financial crisis. So, unless there is a significant hike in interest rates, zombie businesses can stagger on for years – safely ticking over but unable to take advantage of any new market opportunities.

In our market, these zombie fabricators obviously help to maintain overall capacity, but they do little to help those ambitious installers who want to grow and want to work with a fabricator who has the means to grow with them.

By contrast, as one of the UK’s leading Rehau trade fabricators, Euroglaze has been actively reinvesting our profits into the business for many years and, never at a faster rate than since the 2020 lockdown. We have just opened a 500m2 factory extension in Barnsley and installed new CNC saws and new machining centres. Just as importantly, we have realigned our production lines and remodelled the workforce to optimise staffing levels so that we can increase capacity at will, without needing to significantly recruit.

Current maximum capacity is 800 frames per week from a single shift, but we can easily adjust our shift patterns to do more if market demand remains at current levels and more new customers come on board with us. Crucially, if demand falls, then we can also scale back our capacity just as easily without it having a damaging effect on our profitability.

We don’t have a giant fixed cost production operation to feed with frames sold at unsustainable prices which undermines the whole market as some of our competitors do. Instead, we have an operation which is easily scalable either up or down, offering absolute security to Euroglaze customers no matter how big they are currently, or how big they want to become.

At many points during the pandemic, we have been producing upwards of 900 frames per week, while all the time maintaining the personalised customer service, outstanding quality and efficiency which has helped to make our name. Lots of these frames are for existing stockists and installers who are seeing their own sales increase, but lots are for new customers who have found that their existing suppliers simply can’t cope with demand.

With no signs of any market downturn as yet, we are still taking on new business from customers right across the UK. We are a true one stop shop supplier – offering the full range of Rehau products, including vertical sliders, bi-fold doors and even fire rated windows, as well as PVC-U and composite doors.

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