It was an interesting time for a home-technology show in England, just two weeks after Brexit, when Brits voted to leave the European Union.
During Essential Install Live, a two-day event held in Chelsea, just west of London, the home-tech community seemed to agree that Brexit would be pretty painful in the short term, if for no other reason than fear and uncertainty.
“I had a six-figure job cancelled,” says Philip Cotton of Finite Solutions, a London-based integrator. “He said he was moving out of the country.”
Cotton, like other integrators interviewed at the show, felt “confident that we’ll make it up,” but the short-term prospects are scary.
Long-time CEDIA board member Kris Hogg, principal of the UK integration firm Konnectiv, calls it “controlled fear.”
“Even as projects are about to go live,” Hogg says, “we’re getting asked to redesign them,” due to economic uneasiness among developers and property owners themselves.
At this tenuous time, Hogg says he’s relieved to have transitioned to a business model that relies more on subcontractors than full-time employees.
During a panel discussion at EI Live, with myself moderating, Hogg likened the A/V business to an accordion, always compressing and expanding like the ebbs and flows of business. Employing outside contractors helps Konnectiv stay flexible during the good times and bad. And it could get bad.
It’s the same approach employed by the integration company Customised, whose principal Kris Gamble also spoke on the dealer panel at EI Live. A well-curated team of subcontractors, he says, helps to keep the firm nimble.
In that regard, Gamble is less concerned about operational issues as he is about the perception towards smaller firms like Customized in a period of economic volatility.
He wonders if prospects might think: “Can they weather the storm?”
Weaker Pound, Higher Prices
One immediate concern of Brexit is the value of the British pound, which dropped precipitously after the EU vote causing a sharp increase in the price of imports, and potentially sapping pensions.
After the vote and the political turmoil that followed, the pound reached a near-30-year low of $1.3342 (now recovering with the appointment of Theresa May as prime minister). At one point, the volatility of the pound exceeded that of the perennial yoyo that is Bitcoin.
Dealers who locked in proposals for long-term projects could find themselves in a pickle if they and their vendors didn’t insure themselves against currency fluctuations.
During the EI panel discussion, Gamble expressed “concern about projects underway,” anticipating new project costs with the lower pound.
There’s no doubt product prices will increase for British integrators and distributors who pay in pounds. Habitech, a major UK distributor that carries such lines as NuVo, Sonance, Key Digital, AMX and Vantage, has already announced a price increase to dealers.
Even with that, “We’re still taking a hit,” says managing director Jonathan Pengilley, who notes that Habitech will absorb a good chunk of the price increases themselves after current inventory is exhausted.
Stuart Tickle, managing director of the distributor AWE, says he’s less concerned about increased pricing – all UK distributors are in the same boat – than he is about the psychological implications of instability.
“It’s only a problem if we talk ourselves into a recession,” he says.
New Conversations with Clients: Control vs. Entertainment
With economic uncertainty in the air, the conversation with customers will likely center more on the practical and less on the frivolous.
When budgets are set for new construction or remodels, clients start with their dream amenities and end up slashing goodies, especially from the electronics list.
“How do you convince them [clients] to include us as part of the essentials?” Gamble asks.
One way he is addressing this issue is by segmenting the “lifestyle” elements and “entertainment” aspects of a home-technology project. The segmentation occurs both in the conversation with clients, as well as the technology implemented – generally KNX (or HDL) solutions for home controls and separate A/V solutions as needed.
In this way, a proposal can clearly reflect the things a client really should have right away vs. what they can add later if they’re concerned about the budget.
Interestingly, it’s the same approach that Hogg has recently begun implementing, creating clear lines of demarcation between automation and entertainment.
He too is shifting to KNX for control, and often recommending separate A/V control systems, either for standalone operation or for integration with KNX via a gateway device.
As Hogg says, “We have to get more imaginative with Brexit uncertainty.”