We Face Another Black Swan Event

Black swan event: “A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.”

During my working life I have seen a number of Black swan events. The first being the Global Financial Crisis and the collapse of Lehman Brothers that threatened to upend financial stability around the world.

Then we had Brexit, with the UK voting to leave the EU. Although that was less of a short, sharp shock and it developed into a drama that lasted five years and created a general malaise around the UK economy.

Next was the COVID-19 pandemic and the lockdown of most of the world. It caused Governments to pump trillions of dollars and pounds into people’s pockets to keep economies afloat. The effects of which were massive inflation and a cost-of-living crisis.

Now, we face another in the form of Donald Trump’s tariffs.

Markets in turmoil

Unless you’re living under a rock, you’ll have noticed that stock markets around the world have not taken lightly to Trump’s tariffs announcement. In the US alone, stocks lost $5.4tn in value in two days. Europe and the UK have gone through similar shocks in terms of % drops. If you have stocks and shares, or a pension invested in markets, these have not been good days for you.

The market rout has continued today, with Asian, European and US shares all taking another dive lower. We have not seen moves like this since the COVID pandemic.

On top of the various problems the UK fenestration market is having to deal with, the negative sentiment this will spread to consumers and businesses is certainly not going to help matters. Whilst market moves may not hit home immediately in the pockets of the person on the street, the media coverage certainly will. This is yet more noise that our marketing messages have to cut through.

There are many moving parts to a moment in history like this. I will try and explore some of them and what it means to us in our marketplace.

Spending decisions

For consumers to spend on big-ticket items, like new windows and doors, consumer confidence has to be strong. It has not been strong for a good while now, but this upending of the global economy is only going to exacerbate the already low confidence levels. People need to feel safe, secure and happy in order to spend, and that is not where the general public is right now.

It’s not just the public but businesses as well where sentiment matters. When financial conditions become so difficult and so volatile, companies put the brakes on spending until the longer term vision becomes clearer. It is very difficult for companies to commit to spending decisions when they cannot see what the short and medium term futures look like.

This is only day three of the stock market puke, yet it feels a lot longer than that. Ideally, the world needs to see some kind of intervention either from the White House or Trump himself, which will allow markets to feel calmer about the future. Unfortunately, there is absolutely no signal whatsoever that Trump is prepared to back down on tariffs, most of which come into effect in the next 36 hours at the time of writing.

It is reported that around 50 countries have been in touch to attempt to negotiate with the US on tariffs, but any deals are likely to take weeks and months to arrange, and some will not happen at all. Trade deals are also reported to be hinged on other countries reversing trade deficits with the US, which is a very different part of the economy and very unlikely to happen.

Inflation

Almost all economists and trade organisations are agreed on the principle that tariffs are inflationary. They will cause the price of goods around the world. That will sound exhausting to all of us considering we have only relatively recently waves goodbye to the wave of inflation that was caused by COVID-era schemes to keep the economy afloat.

It will likely take some time to feel this, perhaps 3-6 months. But it is a supply-chain shock that is coming down the line. One thing to watch out for is the first raft of suppliers that will be looking to pass any rising costs further down the supply chain. We hope that it will not be at the pace or ferocity that we saw during the COVID glut, but only time will tell.

Whilst Trump rants on social media about inflation coming down and that tariffs aren’t inflationary, it only serves to show his ineptitude.

Small wins

When you get massive financial upheaval such as this there are always small wins to look out for. This time around is no different.

For example, the price of oil has dropped sharply. WIT Crude has shed $11 in three trading days, going from $71 to $60. Brent has undergone a similar drop. Once the price drop filters through that will mean lower petrol and diesel prices. This will impact positively on transport costs as well as energy costs.

Then, there are interest rates. Because of what has happened over the last three days, it is now far more likely that central banks will have to cut interest rates to face up to the worsening economy. Emergency rate cuts are not out of the question either. During the last two Black swan events the Fed, the Bank of England, the ECB and others stepped in to dramatically lower rates to help prop up our economies. This would be good news for people with mortgages – an area of the economy that has been battered over the last few years.

This will combat at least some of the inflationary pressures that are coming down the track.

Recession

Over the weekend, the major US financial institutions had the odds of a recession at 60%. If the market ends in the red again today that number will surely go higher.

In the UK, we were likely headed for a recession anyway. The economy was stagnant, and we had a Spring Statement that did nothing to alleviate concerns from business and consumer/business confidence was anaemic. Now, we have the tariff problem to navigate.

The fenestration sector is going to have to prepare for a recession if it is not here already. If we can manage to stave off a recession, a flatlining economy is perhaps the best outcome we can hope for in 2025.

What can be done?

Much of the above is out of the control of fenestration companies. So what can our sector do in the coming months to try and keep the wheels moving?

National Insurance contributions and minimum wages have all gone up for companies in the last week, and we’re being hit with price increases caused by those measures at the same time. Finding efficiencies anywhere you can is going to be important. Shopping around for the best energy deals, making internal processes faster and more productive, and quicker decision-making can all make a difference. Sadly, some companies may choose to shed jobs as a result, which feels inevitable in this sort of environment.

Refining your marketing message is going to be important as well. It is vital not to go dark during a period like this. Talking about your USPs is going to be even more important now than it was. Look at ways your business is different to the competition and push those. Push quality over everything else. There is no point getting involved in a race to the bottom; the profit margins simply aren’t there in which to do so, plus it’s a grotty long-term strategy anyway.

Boost your marketing. Going dark during a recession is like pouring fuel on a fire; you’re only going to make things worse. Luckily, we live in a world where technology allows you to market yourselves and your products to consumers largely for free. So, start leveraging social media platforms – all of them – to your advantage. Pinterest and Instagram are great for visual-based communications.

Focus on lead generation. You cannot sell anything without the leads being there, and that is one of the greatest challenges for installers right now. You create enough leads, then you’ll inevitably get sales, even if the conversion rate is one in three.

We’re going to have to hold on tight for the next few weeks and months. Q2 looks like it is going to be very rocky indeed. Some may not make it. Some may decide to bail out and close their doors. With things so uncertain, there can be no accurate predictions of what is going to happen even on a day-to-day basis. We have to keep as focussed as we can on our own tasks and work as best we can to achieve our own goals.