Bad budget and cheap glass
Cornwall Group’s chairman, Mark Mitchell, discusses two big challenges facing the industry – the autumn budget and an excess of cheap foreign glass.
The Cornwall Group is a family run independent business, which means that we aren’t run by accountants with the aim of maximising profit over a short period.
Instead, we plough profits back into the four multi-site businesses that make up the group – Cornwall Glass Manufacturing, Cornwall Glass & Glazing, Mackenzies and Forward Glass – investing in colleagues, machinery, and transport.
This is why the budget in October sits uneasily with me, and it will unfortunately have a negative impact on the economic recovery that we are all planning for in 2025 if other businesses continue to see their bottom line shrinking.
I understand that raising tax is important, especially if that money will be invested back into major projects that we can all benefit from. But businesses cannot simply turn on a sixpence when demand picks up again. Taxing employment rather than profit could reduce businesses’ ability to invest in their operations to meet an uptick in demand.
In fact, after 18 months of little or no growth, many companies would have cut back their operations, including staff, and may have delayed capital expenditure decisions until the market improves. And if those businesses are managed by an investment firm, then a healthy dividend will also be expected – putting further pressures on profits.
Increasing employers’ NICs has the double whammy of reducing the available profit that can be used for future investment, while dissuading firms from employing skilled workers (exacerbated by the 6.7%increase in the National Living Wage), at a time when employing and training new entrants is vital for the health of the glass industry.
If this budget were to have been announced in 18 months’ time – or phased in – then maybe it wouldn’t have hit such a nerve, but while we expect market conditions to pick up in 2025, it is far from guaranteed.
We believe the Cornwall Group of companies are well-positioned to supply leading products at volume as trading conditions improve because we’ve continued to invest while the market has been quiet. We don’t invest for today, we invest for tomorrow.
This is why we have three toughening furnaces from Glaston on order, with the first due to be installed at Forward Glass in the spring 2025. This represents an investment of around £3m.
We also continue to invest in our colleagues by developing bespoke courses to train the next generation of glass professionals, and our apprenticeship programme is active across all our sites from Cornwall to Birmingham.
The bedrock of a sustainable business is stability. That includes your business partners, your board of directors, and external factors. It recently occurred to me that in my 37 years in this industry, I’ve witnessed 10 prime ministers. I agree that change is healthy, but stability is at risk if the decision makers at the top change with such frequency.
Looking ahead to 2025, the overall expectation throughout the supply chain is that activity in the first half will be suppressed, which could have serious negative repercussions.
Maintaining healthy profits is going to be difficult for everyone. I’ve already discussed the pressures of the Budget, but the industry is awash with cheap foreign glass at the moment, which is limiting glass manufacturers’ ability to build in margin. In fact, I understand that in many cases they are selling products at a loss.
If they aren’t making money, will they continue to manufacture glass on these shores? And if operations are closed, how will this affect market supply.
I believe there is about a third more glass in the UK than we need. That isn’t a great position to be in because glass production isn’t something you can simply pause until conditions improve.
In a nutshell, there are three float lines in the UK, yet we currently have a capacity requirement for two. In Germany, two float lines are about to close – having come to the end of their serviceable life – and won’t be replaced or refurbished.
If a float line were to close in the UK, there is currently enough glass in the system to cope with an increase in demand in 2025, and Cornwall Group is well-positioned to increase glass product supply as and when that happens.
But looking further ahead, it could weaken us as an industry.
We shouldn’t be embarrassed by healthy profits, but we should aim to create them based on the quality of our own product or service offering, not by screwing down our suppliers. Because if they can’t invest in their own operations, that relationship will be short-lived.
Suppliers who invest for tomorrow will ultimately provide the bedrock for your business’s success.