APPENDIX 6
Memorandum submitted by the British Furniture
Confederation Public Sector Working Group
THE BFC
The British Furniture Confederation (BFC) is
the single voice for the UK furniture and bed making industries.
Formed in May 2006, the BFC brings together the key trade associations
and other representative bodies, together with the GMB union,
in order to raise the profile of the industry.
THE FURNITURE
INDUSTRY
Annual output from UK furniture manufacturing
is currently worth nearly £10 billion at factory gate prices.
The industry directly employs around 124,000 people within 7,500
enterprises and makes a significant, but often unsung, contribution
to the UK economy. In addition the industry supports (and is supported
by) a large supply chain (with its associated wealth and employment
creation) comprising materials suppliers, component manufacturers,
designers, distributors, contractors and retailers.
The industry is divided between small companies
and relatively large concerns. It is estimated that 67% of all
furniture manufacturing concerns employ less than nine people,
but also that the largest 300 companies account for 45% of the
total employment.
Although there are some pockets of activity,
such as in South Wales and the Long Eaton area of the East Midlands,
the industry has no distinct geographical base, with companies
and employment spread nation-wide.
The UK furniture industry is often segmented
into three primary groups, based around the end market, although
in practice the divisions between such groups is often blurred.
— Domestic: serving the public,
mainly through retail outlets and for household use. (approximately
58% of output by value.)
— Office: desking, seating, tables,
cabinets and other items for the office environment. (approximately
13%.)
— Contract: furniture for public areas
such as hotels, schools, residential accommodation and airports
(approximately 29%.)
CURRENT TRENDS
UK furniture manufacturing is not immune from
global forces and, as with other manufacturing industries, it
has witnessed a strong growth in imports over recent years, particularly
from China and Poland.
The transport of furniture can be inefficient,
often entailing the movement of large volumes of fresh air. Until
ten years ago international trade was relatively small and imports
accounted for just 15% of sales. However, over the last 10 years
this figure has grown significantly and now imports account for
42% of the end market.
The UK is the world's fourth largest consumer
of furniture. On a global scale furniture manufacturing is big
business: it is estimated to be worth around US$240 billion at
factory gate prices. At the macro level there are three major
trends affecting global furniture production:
1. Consumption is growing in real terms
in all major markets and is expected to continue to grow into
the future. This is primarily due to improvements in standards
of living in emerging countries and increased disposable income
in developed countries. The markets exhibiting the highest growth
rates are the new EU members and much of Asia (including China).
2. Globalisation is increasing and international
trade is emerging. On a global scale, measuring imports as a percentage
of consumption shows a doubling from a fairly low figure of 15%
in 1995 to 31% today.
3. Production is shifting from major industrial
economies to emerging nations. Even more dramatic is the fall
in the proportion of exports that emanate from developed countries,
with a consequent rise from emerging countries—particularly
Poland and China which have seen significant investment in new
plants designed specifically for exports.
China is now produces 9% of all furniture and
12% of exports and will soon overtake Italy as the leading exporter.
It has witnessed an annual average growth rate of 23% since 1978—driven
by both internal consumption and exports. Domestic consumption
is 75% of the output and has doubled in five years—driven
by a growth in the size of urban housing. Main export market is
US (50% of exports) (UK fourth).
CURRENT ASSISTANCE
AND SUPPORT
At present, despite being a major source of
employment and wealth creation, the assistance and support enjoyed
by the UK furniture manufacturing industry is limited. The funds
available from Government have been reduced considerably in recent
times and the limited amount that is currently available is typically
provided in a piecemeal fashion, usually as part of another initiative
rather than aimed specifically at the furniture industry.
The biggest government funded project currently
underway is UKfirst, an industry forum for furniture manufacturing,
supported by £1.74 million from DTI. UKfirst is a five year
programme, launched in 2003, which aims to improve the competitiveness
of the UK furniture industry by helping it to achieve world class
performance in quality, cost and delivery. It has achieved widespread
recognition and support from manufacturers across all sectors
of the industry and has a track record of delivering measurable
successes.
Support from the regions is notable for its
absence. Despite furniture manufacturing being a major industry,
its geographical spread means that most Regional Development Agencies
do not regard it as a priority sector. The exception is Advantage
West Midlands which has established Furniture West Midlands.
PUBLIC PROCUREMENT
UK Government cannot institute a buy British
campaign, nor would UK manufacturers wish them to. Turning the
question round, the Wood Enquiry of 2004, to which we gave evidence,
was looking for discrimination against UK manufacturers. The findings
were that there was no direct discrimination but there were cultural
factors and to some extent regulatory or quasi-regulatory factors.
No convincing evidence of support to local manufacturers was found.
BEST VALUE
The test on which the purchasing decision is
made is "best value". Best value is not lowest cost
and should encompass a whole range of factors including but not
limited to: fitness for purpose, aesthetic, durability, environmental
impact, continuity of supply and so on. Unfortunately purchasers
still don't seem able to cope with a complicated purchase and
buy on the simplest criteria of lowest cost.
Too often purchasers, having decided criteria
then waive it later when that option turns out to be more costly
than an alternative that does not meet it. An example of this
was the DEFRA office furniture tender that asked for "Chain
of Custody" certification but was awarded to a non-certified
company because the certified company's bid was more expensive.
We ask that all tenders are published with objective,
transparent and weighted criteria and that the contracts are let
in accordance with those criteria.
PROCUREMENT INFORMATION
We also ask that the information required from
suppliers is relevant to the purchase. Manufacturers have been
asked for their employment rolls, complete with NI Numbers to
satisfy the requirement that they have the technical competence
to manufacture their product. In reality, this is to check on
benefit fraud or illegal immigration. The proper way to deal with
these issues is for the relevant authorities to visit suspect
companies.
These extra demands are not relevant to overseas
companies which makes bidding easier for them. It has been suggested
that in future manufacturers will be asked for information on
the ethnicity of their workforce. Overseas manufacturers are not
necessarily obliged to hold this information and there may be
no means of verifying whether the makeup of their workforce matches
their local population.
In some countries ethnicity may not be an issue
but religion is but this is not asked for. This information therefore
becomes a way that UK companies can be excluded from contracts
but not overseas companies. UK Government could support UK industry
by confining information requested in tenders to that which is
relevant to the purchase.
E-AUCTIONS
Furniture is recognised to be a complicated
sell. It contains a significant design content, even in stock
items. For an installation, which may be up to 30% "specials",
the design content is substantial. It is very important then that
the supplier and purchaser enjoy a good working relationship if
the contract is to be a success.
The widespread practice of e-auctions is damaging
this relationship to an extent that many companies are refusing
to take part in tenders that will be e-auctioned. Because there
is no relationship, e-auctions favour overseas companies competing
solely on price.
The e-auction prevents a proper dialogue between
the purchaser and supplier that might well lead to an innovative
solution exceeding the purchaser's expectations, or it channels
design in one direction encouraging infringement of design rights.
Apparently similar products have different prices because this
reflects small but important differences in materials, construction
and quality. A good purchaser should be able to recognise these
differences and judge the value they add to the product compared
to the price. UK Government could support UK industry by ceasing
to e-auction furniture contracts.
The new Procurement Directive and some case
law allows greater weight to be given to environmental issues.
We welcome this and the growing recognition of concepts such as
"food miles".
Pollution is a global issue, emissions to air
in China eventually affect us all. Generally, Europe and UK have
acted and are acting responsibly but many countries have a long
way to catch up. UK manufacturers have invested significantly
in environmental management systems and environmental protection
measures.
It is invidious that the UK Government is considering
paying for our dirtiest competing countries to do the same. We
should simply not trade with them or if we do, apply an import
tariff that will be paid back to that country to be used specifically
for environmental measures. Would UK Government consider not purchasing
from manufacturers based in countries that have either not signed
the Kyoto Agreement or have not met their obligations? UK Government
could support UK industry by giving due weight to environmental
considerations in particularly in a broader sense, not just at
individual supplier level.
SUMMARY
UK furniture manufacturing is a large and often
unsung industry that employs a significant amount of people and
makes a considerable contribution to the UK economy. It has typically
been a traditional and rather static industry, but is now undergoing
dramatic change driven by a growth in low cost imports.
Nevertheless, it would be rash to dismiss UK
furniture manufacturing as a twilight industry that cannot compete
with the products from emerging economies. A UK furniture manufacturing
base provides many advantages that simply cannot be replicated
in a remote location. However, although UK industry needs to change
and develop if it is to compete, there is a persuasive argument
that furniture manufacturing can and should be encouraged to rise
to the challenge.
The industry needs targeted support and assistance
at the macro level in order to bring it up to world class levels
of performance. The current regional approach to funding favoured
by DTI is simply not working, because not only is the industry
geographically spread, but so is the entire supply chain. However,
if competitiveness is to be raised it is not just manufacturing
issues that need to be addressed but an improved performance throughout
the supply chain. Ukfirst has demonstrated that the industry is
willing to support and embrace change, but it needs targeted support
to encourage such change and provide the framework for some of
the collective actions that are essential for future success.
September 2006
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