If Sterling Recovers, Will Prices Ever Come Back Down?

If you ask every manufacturer that has put their prices up in the past few weeks and months, almost every single one will tell you that the fall in Sterling after the Brexit vote is the sole reason.

Some companies have put their prices up a few percent. Some have put them up by the high double-digits. Some change on a weekly basis! All, as we’re being told, is down the currency fluctuations.

So if this fluctuation to the downside is the cause of the rise in prices from suppliers to installers, will a fluctuation that sees a rise in the value of Sterling versus the Dollar cause a price drop?

Probably not.

Prices always rise, they never fall

There are two narratives at play at the moment. First there is the public one, where installers are being told that prices are having to go up because of the drop in Sterling. And for most installers, including myself, we accept that. The pound is down a good 20-25 since the vote, and that has to have some kind of effect. Why there is such a wide gap between the price rises between one supplier versus another is a debate in itself. But this is the situation we find ourselves in.

The other narrative however is the private one. Whilst this temporary drop in Sterling is firmly the sole reason for price rises, the reality is that the suppliers putting their prices up intend for those prices to remain at these new levels. Privately they will already know that these prices are here to stay, no matter what happens to Sterling in the coming weeks and months. If anything, they may use Sterling as a scapegoat for future rise, even if the Pound stays where it is.

Ask yourself, when have you known the prices of windows and doors from suppliers to installers to fall over time? I can’t think of a single time in my near 12 years in sales where a supplier has come to us to say that prices are going down. So we shouldn’t be expecting it to be any different this time round.

A tricky position to navigate

It’s not going to be plain sailing for suppliers who have raised prices and blamed the drop in Sterling. If over the coming months we see a recovery, which is quite feasible if the hints and sounds that come out of the Government and economy are positive, then we can expect to see installers going back to their suppliers asking where their price reductions are now that Sterling has recovered.

And this is the problem. Every supplier that has raised prices has been explicit in blaming currency issues. They have nailed their colours to the mast. This is very much the reason for the price rises, no other. It means that there is very little else to defend keeping prices raised, should Sterling recover in the medium-term.

Politically, this is going to be a position that will become difficult to defend. During normal times, where currency is stable and the political landscape is calm, a price rise generally passes on to installers without much fuss. It’s different this time round. Many fabricators have raised prices, more than at any other time in a long while. And they have all blamed a single reason. However if and when Sterling recovers back to pre-referendum levels, installers will likely be putting pressure on fabricators to reverse those price increases.

Suppliers won’t want to reverse those increases. They have new margins to maintain, and the long term trajectory for raw material prices are to rise steadily anyway. They will not be keen to pass on the extra profits they will make should Sterling start to recover in any serious manner. This though is going to require an immense amount of PR finesse. Installers are going to be tuned in more than usual to currency swings, and if they see a big swing to the positive for Sterling, they will be on the backs of their suppliers asking why prices aren’t going back down when they went up so quickly after the Brexit vote.

The issue of price increases isn’t going to go away, and this is perhaps going to be a bigger political issue for the UK fenestration market than some may have anticipated.

Should prices fall back if Sterling recovers to respectable levels? Should suppliers be allowed to leave prices at new current levels, even if there is a currency recovery? How should suppliers handle the issue if the Pound recovers? All comments welcome below.