Undaunted by uncertainty – President on member services, Brexit and the future of hardware

Kieran Burke, Group Procurement Director, Grafton Group plc, has been elected as HAI President for a two-year term, assuming the role at a defining time for the hardware industry and the country overall. In this interview, he discusses a range of issues including the reshaping of HAI to better serve its members and his priorities for the next two years.

The Hardware Journal: How will you approach your term as HAI President?

Kieran Burke: The role is shaped largely by the four pillars of HAI’s strategic plan:

• representation which includes advocacy and lobbying;
• education, encompassing the development of business supports, training and courses;
• market intelligence, which includes research and the development of the HAI Business Index; and,
• the development of networking, through events such as the Hardware Show and the Hardware Conference.

My aim is to work with the Executive Committee and HAI staff to build on the achievements of my predecessors in delivering on the four pillars. When I exit my role as President, I’d like to leave HAI in a better place with enhanced services, within an improved business environment for members and as a stronger association overall.

How strongly do you feel the Irish merchanting sector is performing overall and are there any signs that the rural recovery is picking up pace?

In terms of trends, 2016 was the third successive year of market growth, following the extremely challenging years of 2008 to 2013. Recoveries from previous recessions generally began in Dublin and the large conurbations around the country. While the downturn in the 2008-2013 period was far more damaging than a recession, I believe that the current uplift is following a broadly similar pattern to previous recoveries, i.e., rural growth is happening, but at a slower pace. The solution for rural areas must be wider than just incentivising businesses; broader social regeneration is needed.

The Irish economy is facing a lot of potential threats, with Brexit a particular focus of concern. As Group Procurement Director of Grafton Group plc, which has a strong presence in both the Irish and UK markets, what’s your assessment of the outlook in the short to medium term?

Predicting the outcome of Brexit at this point would be fortunetelling rather than forecasting; the key word is uncertainty. We know from our recent past that uncertainty leads to concern which leads to cautious behaviour in spending. However, as a counter to this, the fundamentals of our economy are sound, with a promising pipeline of commercial construction activity and a well-documented requirement for activity in new housebuilding. So, amid the negativity, there are some positive pressures too. The most immediate fallout from the Brexit vote has been the significant shift in the euro/sterling exchange rate. Having said that, it’s important to put that shift in context. Looking back over the last five years, it is interesting to note that the average exchange rate versus the euro for 2011 was 87 pence and for 2013 was 85 pence. So, to that extent the currency drift that we’ve seen so far is not unprecedented. Of course, these are early days and there’s no precedent for Brexit itself.

No businesses in Ireland will have greater concern about Brexit than those operating in the border counties. In my experience, these businesses have shown tremendous resilience and business acumen in facing currency challenges in the past. As the Brexit process unfolds, HAI will be strongly focused on ensuring that our members’ interests are represented and defended strongly and we will, in particular, make every effort to support border county businesses in dealing with the specific challenges that they may face. In this context, I would like to add that while, obviously, HAI cannot influence exchange rates, one element of cross-border trading – VAT compliance or lack of it – is an issue where we can provide practical support to our members through liaising with the appropriate government agencies to seek effective enforcement and a fair trading environment for all.

What’s your assessment of how the Association has evolved in the last few years?

The organisation has become an even stronger voice for the builders merchant and hardware sector and this has been evident in a number of ways. Firstly, the Association’s lobbying and advocacy on behalf of its members has been exceptionally focused and intensive in recent years. For example, we consistently lobbied for an extension of the Home Renovation Incentive (HRI) scheme, so it was gratifying to see that the scheme was indeed retained and extended in Budget 2017.

Similarly, we made a carefully argued and specific submission in relation to the need to provide a stimulus for housebuilding throughout the country. Although it is early in the process, we welcome the initial measures taken by Minister Coveney and the Department of Housing, Planning, Community and Local Government to urgently address the housing shortfall. The housing challenge is complex and influenced by many factors and we will continue to monitor the ongoing response to the issue with a view to ensuring that the Government sustains its commitment to increasing the housing supply.

The demographics suggest we need 25,000 new houses built per annum and we have been building 10,000 to 14,000 in the past three years, so there is clearly a pent-up demand.

We understand that you believe the provision to members of credible and authoritative market intelligence is one of the Association’s most important services?

HAI has, in recent years, made substantial progress in offering members vital market data and information and one of the most significant initiatives in this regard was the launch and development of the HAI Business Index. This facility is building a bank of useful data that was heretofore unavailable to our membership.

The participation of members in this innovative service through the provision of anonymised information, once a quarter, has been crucial to its success and I would urge those members who are not taking part to get involved at the earliest opportunity. Anonymity is protected and the Index, as it evolves, will be an increasingly important tool for the Association and its individual members. In the next few years, the Index will continue to develop as a credible source of information for members but members’ input is vital if this is to be achieved.

As well as engaging with HAI directly, do you think there are benefits to be had through industry engagement and networking?

With the time pressures that merchants face today, networking opportunities are limited, which makes it even more important to ensure their effectiveness. HAI recognises these realities and this has been evident in the greater scale and sharper focus of our key events in recent years such as the President’s Ball. The Hardware Show 2015 was a tremendous success and this year’s show will be the biggest in the industry’s history. The line-up of experts and industry leaders that participate in these events has been unrivalled in terms of industry knowledge, experience and relevance. These events have attracted big attendances, making them uniquely effective venues at which to meet colleagues from every sector of our industry and every part of the country.

Under the representative pillar of the strategic plan, what will be the key priorities that you will focus on this year?

The HAI’s lobbying and advocacy planning is guided by our members. I want to emphasise how important it is that members get in touch with us and let us know what your concerns are. The issues will be different for each member and the Executive Committee’s job is to gather all the member views, assess them and prioritise the issues. We then build our Budget Submission and our lobbying and advocacy plans around those issues.

Based on the feedback from members in the past year, our three primary advocacy priorities will be:

• ensuring a strong follow-through on the HRI Scheme;
• supporting faster development of the housebuilding sector; and,
• seeking effective ways to speed up rural recovery.

As regards the HRI Scheme, we want to see the Government maintain and consolidate its commitment. Recent statistics from Revenue show an estimated 77,000 works have been registered with the scheme across more than 52,000 individual properties nationwide since it began. The estimated value of works put through the scheme is €1.228 million (HRI figures as of 31st December, 2016).

We want to see the scheme gain greater traction in rural areas and this is part of a wider concern on the part of the Association about the slow pace of economic recovery in rural Ireland. Builders merchants and hardware stores are an integral part of rural life and a bellwether for the rural economy. We have proposed a range of incentives that would assist our members and indirectly help to boost economic activity across the country, including a corporation tax allowance for building material stocks up to a limit of €50,000 in rural areas. The lack of tax relief for stock, which merchants have invested in, is particularly challenging for businesses in struggling rural areas.

A strong clampdown on illicit trade in solid fuels would also have a beneficial impact for all the law-abiding hardware businesses across the country. The two main anomalies that must be addressed are the flow of untaxed product from outside the State to end users without the application of carbon tax or VAT and the sale of product, tax-free, for export from the State, which is subsequently not exported.

HAI is seeking the registration of all solid fuel traders as provided for in Government legislation. Effective enforcement of the law would be a major step forward in curbing illegal solid fuel sales. Furthermore, HAI is seeking that increased resources be given to Revenue audits to ensure greater compliance with the tax legislation. And a publicity campaign is needed to make the public fully aware of the devastating impact that the illicit solid fuel trade is having on the economy in rural areas.

Another major issue for hardware businesses and builders merchants in rural locations is the utterly inadequate broadband provision across large swathes of the country. State-subsidised rural broadband rollout is not scheduled to be completed until 2022. In 2017, a business without an internet connection is like a business without a phone or a postal address.

You say that you want to see further enhancements to services for members. Could you explain what you have in mind?

HAI has been developing a strong suite of educational and training services and the Association intends to both increase the depth and specificity of training and extend the range of programmes and courses on offer.

Classroom training has now been established on a firm footing. Our aim with the training we provide is to be sector-specific, with courses that members require and that are tailor-made for our industry, including topics such as credit management and improving profit margins. Last summer’s office move to the Naas Road means we now have our own training facilities in a convenient location which has enhanced our offering. We have also just completed a full revision of our online training, development and information provision through The Hardware Education Hub as we appreciate that many members may not be in the position to send staff off-site, and many areas of staff development lends itself to learning online.

There are many fundamental business services that the Association offers including Human Resource support, preferential rates on merchant card services, insurance quotes etc. We maintain a ‘listening’ process with members to ensure that our services are appropriate and relevant. We also ensure that the services we provide are the best we can negotiate, based on the strength of our membership numbers. These services will continue to be enhanced and refined over the course of the next two years.

HAI events have been going from strength to strength with The Hardware Show 2017 located in a much larger venue to satisfy demand for stand space. Is this evidence of a greater confidence in the sector?

We must remember the drop from peak to trough was close to 70%. The growth experienced in the last three years has been an important antidote to the five previous years. I don’t believe we are yet back to a stage where we have a ‘normal’ market. So far, we may have recovered close to half of that 70% drop. So, there is a changed mood and I believe that the success of HAI events is reflective of not only the more positive attitude in the industry, but also the networking value of the events themselves. There is a renewed level of confidence but I think relief is the main emotion for those of us who have come through the collapse of the market in 2008.

It’s important that we learn the lessons from the past. It would not take many wrong decisions to have us back where we were in the bad days. We need to show we have learned the lessons from the past and maintain the professionalism, cost-effective management and bottom line-focus that has stood the industry in good stead in recent years.

What in your view will be the most important driver of change in the industry in the next few years?

Even in the context of the major international political developments taking place, the development of our sector’s online presence is the greatest challenge ahead for all our members. Several have already established an online presence but at varying levels of customer engagement.

The competitive nature of the online market will only intensify in the years ahead. The key statistics are outlined in the ‘Innovate or evaporate’ feature in this issue (page 22) by our CEO, Annemarie Harte. It’s clear that our customers are spending a lot of time online so we need to have a strong presence there too.

We also have to consider the amount of time young people spend online and the implications this will have in shaping the customer profile of the next generation. This is our biggest challenge and HAI will be working with our members to keep them informed and up to date on the steps we all need to take to enhance our online presence.

A BUILDERS MERCHANT FOR LIFE

After his Leaving Certificate, Kieran went straight into the business on August 1st, 1978 when he joined builders merchants, Heiton McFerran, where he went on to hold a variety of roles in finance, IT and project management. Following the acquisition of the Heiton Group by the Grafton Group in 2005, he was appointed Commercial Director of the Grafton Merchanting business in the Republic of Ireland.

In 2016, he was appointed to his current position of Group Procurement Director with responsibility across the Grafton group of companies in the UK, Ireland, the Netherlands and Belgium, effectively overseeing £2bn sterling worth of materials. The role, he says, is primarily about facilitating the Grafton team in the different jurisdictions to work together to effectively leverage the group’s volume.

In a sense, he notes with a wry smile, he’s worked for the same company in the same business all his life – a testament to the unique appeal of the merchanting and hardware business, and the fulfillment and satisfaction it provides, despite the many ups and downs!