Conference host Roger Black MBE, NMBS managing director Chris Hayward and financial editor Anthony Hilton.

Back to business

Published:  01 October, 2012

NMBS pulled out the stops to launch the first merchant industry conference in three years. It brought together over 250 merchants and suppliers eager to network on a grand scale. Lisa Arcangeli and Lynn Sencicle report from Marbella in Spain.

Under serene skies, the 250 delegates to this year’s NMBS Conference at the Don Carlos Hotel in Marbella, Spain, were able to network and discuss strategies away from the day-to-day drone of business.

Unlike conferences held during the boom years of construction, this event was tailored to the more challenging economic climate affecting the UK and Europe.

It featured a line-up of heavy-hitting business speakers, an extended ‘meet the merchant’ segment and inspirational talks from two of Britain's finest Olympic athletes – Steve Backley OBE and Roger Black MBE – as a topical nod to the UK’s hosting of the Games.

NMBS managing director Chris Hayward was adamant that this year’sevent would focus on business. Last year, when he and his team were organising this mammoth event, he said that it was vital the industry be given an opportunity to be brought up-to-date with all the complex issues affecting merchant businesses and to enable the industry to air their views and concerns with like-minded colleagues.

Sharing synergies and problems

“You can't achieve success on your own,” said conference host and Olympic runner Roger Black. “You need like-minded people with the same hopes, ambitions and aspirations.”

This opener summed up the theme of the 2012 conference where a 50:50 mix of merchants and suppliers networked and shared industry issues for three full days of business.

Gaining perspective

Consummate professional AnthonyHilton, financial editor of the London Evening Standard and a long-time contributor to our industry’s conferences, gave his views on the state of the economy, how it will impact on merchants and which areas the industr yneeds to monitor closely. Mr Hilton’s forecast about the creditcrunch and the subsequent economic nosedive back in 2008, was spot on and,as he quipped in his introduction, “we haven’t had a conference since!”

Striving to put a balanced view on thecurrent perceived economic chaos, Mr Hilton pointed out that the latest recession,and even the banking crisis, is one of many that have occurred in the past. “Recessions aren’t what they used to be. Back in 2008 I said it would all end in tears. But now, things are getting better, even if it doesn’t appear to be so.”

The euro, debt and even government cuts, Mr Hilton related, were not areas that merchants should panic about. “Wedon't need to worry about the euro,” hes aid. “It’s just the Deutschmark with some disreputable friends. Hard-working Germans and partying Greeks.”

Debt, he said, should be compared with trying to compete with conference host Roger Black without the benefit of performance-enhancing drugs. “The real issue for the euro is competitiveness. Remember that the Greeks first fell into debt back in 370 BC.

“The Eurozone has no problem. The real trouble is that the money is in the wrong place. It is in the North, when it should be spread in the South. German banks are loaded with Greek debt. Theyshould cut Greece out of the equation and deal directly with the banks,” Mr Hilton said.

The future, he believes, lies in breaking up the Eurozone. “If any country should be leaving the euro, it’s Germany,” he stated. If Greece left the euro the new drachma would drop 50% and Greece's legacy of debt would go up by an equivalent amount.

His solution? If Germany pulled out, the country would certainly suffer, but it could afford to. He pointed out that since World War II, 43 currency unions have broken up with hardly a mention. “We view debt as a moral issue and that it is somehow immoral to place the burden of it on our children. Debt is a quantum issue,” he explained.

The UK’s current debt is 80% of GDP. “Taking a lesson from history, after the Napoleonic Wars, the ratio of debt to GDP was 230%,” Mr Hilton said. “In the UK, 70%-80% of debt is not unusual. At present, £45bn of debt goes to pension and insurance funds, so the money is going around within the system. The leakage is coming from foreign debt."

Therefore, it is sustainable for theeconomy to pay for debt interest becauseit is recycled. “The problem arises becausethe Government has rolled overdebt at about 7%. But Greece and Italyhave rolled over their debt at 25%."

As for the Government’s spending cuts, Mr Hilton explained: “There is a perception it is slashing investment and that the country is being thrown out of work. The truth is that the Government has never cut expenditure.” He added that Margaret Thatcher had altered the balance between the private and the state sector and business still existed. “Only the definitions have changed.

“The Government is still talking about cuts because that is the rhetoric of the markets. The cuts won’t get worse. The area to worry about is that nothing the Government does seems to be working.”

The engines of growth up to 2007 depended on ‘easy money’. “What we need to find now are new engines of growth,” said Mr Hilton.“The UK banking sector has £200bn outstanding in commercial property mortgages. One hundred billion of that is ‘underwater’ and cannot be refinanced. So, 70% of loan value has been breached. This takes a long time to recover and that is why the banks appear paralysed,” he explained.

Consumers – the other engines of growth – have their own debt problems and are not spending their cash. And, the companies that do have money are sitting on it, Mr Hilton said. “Much of the economy is doing reasonably well and companies are confident about their prospects, but they are not investing their cash. They prefer to sit on their cash balances.”

Mr Hilton said we should take our lessons from history. “The 1920s was the era of depression. Back in the 1930s the UK economy grew by more than 30% and there was 3-4% growth from 1931 right upto World War II. This growth was achieved through housing. The UK built more than 300 000 houses a year, every year.”

The good news, Mr Hilton added, was that “government is starting to get it. Business Secretary Vince Cable said that infrastructure makes our economy competitive. But, in order to get the economy going, housing is needed and massive investment required with regard to social housing.”

The Government, Mr Hilton added, with its eye on re-election, “panics and is taking steps to get the economy going. It will use housing as a vehicle to do this.” It may take time, he admitted. “It could be another six months before this action starts to filter through.”

Online sales explored

Management consultant Phil Crowshaw’s presentation was about selling online. He breezed along with some good advice for the novice. “It’s all about USP – unique selling points and what makes your company different. The phrase ‘we give good customer service’ is not a USP,” he cautioned.

Insight, information, inspiration and innovation should all feature on a website. “The internet is a great leveller to create opportunities for your business that were unthinkable a few years ago,” Mr Crowshaw said.

People’s attention spans have shortened and need to be quickly refocused. “That is why you can use the internet as a means of getting people to get to know you, like you, trust you and above all, buy from you. You have to make sure that your most wanted ‘action’ is made very clear on your site.”

He urged merchants to use content marketing. “It will enable you to create and distribute relevant media to attract, acquire or engage a clearly defined target audience.”

Mainstream social media, Mr Crowshaw pointed out, was also a useful tool. “Some 50% of all online traffic in the UK is currently on Facebook. Generation X and Y simply consider email too passé,” he explained. He went on to point out that 93% of marketers use social media for their business and 75% of UK users will search the web on their mobile phones at some point, even though 90% of websites do not display on these devices.

With one million smartphones predicted to be in operation by 2013, it is time formerchants to get onboard with the technologies. “If you cannot do it alone, get help to tailor your site to meet your aspirations,” he said.

Let's talk about sustainability

Opportunities are there, if you look forthem, according to Chris Ashworth, associate lecturer in marketing at Oxford Brookes University, and author of the CIMCIG Taking Sustainability to the Consumer report. “The Green Deal will provide opportunities for product demand,” he said. "It will also build new customer relationships and open up avenues to communication with consumers.”

Government advisor Paul Morrell, management consultant Phil Crowshaw and former record holder for javelin throwing Steve Backley.

The Deal will create a certificated route to the residential sector and RMI that will extend to the commercial sector, he said. Opportunities, besides the Deal, are Feed-in-Tariffs, the Renewable Heat Incentive (RHI), BREEAM, Doc L and the Code for Sustainable Homes. The risks, he pointed out, are that the Green Deal is unlikely to be in place in October as originally scheduled. There may might also be a lack of takeup by the industry. Consumer ignorance may mean merchants will be called on to provide information. And, the threats to merchants will come from retailers and the energy companies.“The risk is that merchants might become 2nd- or 3rd-tier suppliers, where products may go from manufacturers directly to customers,” he said.

He showed delegates a chart of signatoriesto the Green Deal and only twowere related to the merchanting sector. The Government, he pointed out,currently views the key trigger points forGreen Deal implementation as coming from:

  • Home moves.
  • Upgrades to kitchens and bathrooms.
  • Heating system renewals.
  • Loft conversions or extensions.
  • Couples having children.
  • Children leaving home.
  • Retirement.

The bad news is the lack of both knowledge and trust. “People do not likethe idea of having to bring installers orbuilders in to do the work,” said Mr Ashworth.

Then there is cost, disruption andlow confidence in suppliers. “The consumer is being asked to manage complex issues with installers with whom they have had infrequent contact, perhaps only when they have had to make a distress purchase.” If the Green Deal is to be sold to theconsumer, merchants should focus on the benefits – comfort and cost-savings, and avoid using terms such as ‘eco’, ‘green’,‘low carbon’ or ‘sustainability’, he admonished.

“Be credible, realistic, accessible and offer the customer verifiable third-party endorsements,” he urged. “Being a generalist is an opportunity for merchants. You are a key advice point.

“Develop partnerships with contractors, integrate your showrooms and increase your customer base and all the products that go with it.”

Construction too slow to change

Ninety-nine per cent of the UK construction industry is made up of SMEs – an area that will be the slowest to change, said Paul Morrell, chief construction advisor to the Government.

He was more pessimistic than fellow speaker, Anthony Hilton and warned that now is the time when radical change is needed.“We are in an extraordinary period ofturnaround,” he said. “There are 300 million people in China learning to speak English. They are not doing that so theycan produce bits for the West.

“We need a new type of thinking. The big challenge now is about money, publicprocurement and sustainable construction.

“With its extremely slow pace of technological change and this industry’s lack of take-up, we need to have an industry that is fit for purpose.”

Complexity, he believes, is the enemy of progress. That, and an adherence to old hierarchies. “There are fatal fractures at present between design and building andin the the management of the constructionprocess.

“We start projects without knowinghow they will finish. Buildings miss theirtargets so widely that, in football terms,they do a Heskey.” While all this is happening, Mr Morrell said, clients are struggling. “We are in a low-innovation industry too far removed from where the money is spent. The real issues are in giving value in service delivery.

“There are 100 000 people living on the streets in the UK and 4.5 million waiting for housing. If we had a war, we would be busy building pre-fabs.”

The issues are standards: solving problems; benchmarking (at present, some projects are two times as expensive as other comparable sites); transparent costs; new procurement models (standardisation means less waste); mobilise intelligence; integration; development of the supply chain; trial projects and do things in new ways and; speeding up payment.

The Government, Mr Morrell said, is publishing a ‘pipeline’ of future works. “Yes, the Government does get the message and is actively being more prescriptive.”

The role of Building Information Management(BIM), said Mr Morrell, means that the industry will be working towards shared data. BIM is a process involving the generation and management of a digital representation of the physical and functional characteristics of a facility.

BIM then becomes a shared knowledge resource that supports decision making about facilities for the earlystages, through design and construction, and then throughout its operational life.

“Looking ahead – what stock do you hold, where will it come from? How doyou deliver materials? What are the Green Deal’s opportunities and challenges? There are simply not enough vans to service 25 million homes,” Mr Morell concluded.

Green Deal or no deal!

“We’re involved with the Green Deal because of the big numbers concerned,” said NMBS managing director Chris Hayward. “Fourteen million homes are to be targeted, of which six million have unfilled wall cavities and six million need loft insulation. There is an annual £1.3bn ECO subsidy and £200m early bird cashback incentive, so business will be there.

“The easiest way for merchants t oparticipate in the Green Deal is to becomea  one-stop shop,” said Mr Hayward. As such, NMBS’ requirements for its members are:

  • That they participate in the Green Deal.
  • That they develop solutions that haveno cost to their businesses.
  • To ensure products and materials aresourced from the originating member, where possible.
  • To produce clear and transparent caseand project management tracking.
  • To ensure they have access to ECOfunding.

There are a number of key action points and opportunities that merchants should be looking at, Mr Hayward explained.These include:

  • Building knowledge – merchantsshould be trained, installers should betrained, and independents should look at what the national merchants are doing.
  • Considering the message – ‘Green Deal’could become ‘Green Homes’.
  • Examining product gaps – cover allareas.
  • Solid wall insulation.
  • Developing project management skillsfor the ‘whole house’.
  • Becoming trusted advisors.n Developing a PV/micro-generationstrategy.
  • Developing strategic business models.
  • Engaging with Green Deal Providers.

The secret of success

Delivering Olympic Performance in the Workplace was the theme of host, sportsman,t elevision presenter and motivational speaker Roger Black MBE and former javelin world record holder Steve Backley.

The two men operate BackleyBlackLLP and were a topical addition to a conferencetaking place in ‘Olympic’ year GB. What is the secret of success?

“Youhave to see it in your mind’s eye. You haveto feel it and you have to trust it,” said Mr Backley.

“The key when it comes to effective performance is to be proactive,” Mr Black said. “If you begin any project with the end outcome in mind, you will succeed. Play it backwards but pay it forwards.”

The Backley/Black credo for success is simple and effective: find your passion –discover what it is, how it affects you and how it can be harnessed to drive higher levels of performance and consistency; create empowering beliefs and harness them to drive your success; develop clarity of purpose and define the resources you need to achieve it.

The duo urged delegates to develop personal relationships and a philosophy towards teamwork that generates intense support to help drive your success and – make it happen through accountabilityand the drive to change and adapt until you achieve your optimum results.

Next year, it’s the turn of the BMF tohost the All-Industry Conference on 20-23 June at the Tivoli Marina Hotel in Vilamoura, Portugal. For more information, contact Christine Harding on 020 75347426.

This article first appeared in the July/August issue of Builders' Merchants News.

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