Rearo's Graham Mercer: Why UK manufacturing must focus on value over cost

Graham Mercer, MD of Glasgow-based kitchen and bathroom surfaces specialist Rearo, is all for healthy competition in the market, but suppliers need to focus on offering value rather than dropping prices.

There is a conversation I have had more times than I care to count over the past 18 months. It usually begins with a customer telling me they have received a quote for wall panels from another supplier at a price that seems almost too good to be true. It usually ends with me explaining as diplomatically as I can that, in most cases, it is.

The UK wall panel market – indeed, large swathes of the UK construction products industry – has been flooded with cheap imported goods, predominantly from China, but increasingly from other low-cost manufacturing nations.

These products arrive on our shores at prices that domestic manufacturers simply cannot match, and they have dragged the market down in terms of price, margin, and – most worryingly – on quality. It is a race to the bottom, and the tragedy is that too many businesses are sprinting headlong towards it.

This is not a complaint about competition, which I regard as healthy and necessary for our economy. Competition drives innovation, efficiency, and improvement but what concerns me is the nature of the competition we are facing, and the long-term damage it is doing to an industry that this country genuinely needs.

Flood of cheap imports
The impact of Chinese PVC imports on the UK wall panel market has been profound. These products are manufactured at scale in facilities that enjoy lower labour costs, looser environmental regulations, and economies of scale that simply do not exist in the UK. They are shipped halfway around the world, contributing to carbon emissions, and sold here at prices that undercut domestic manufacturers by margins that can exceed 50%.

On the face of it this looks like a win for consumers – who are able to carry out affordable renovations on their homes – as well as lower costs for developers, distributors and retailers. But the first casualty is quality – products manufactured to a price point, rather than a standard, inevitably cut corners.

I have seen imported panels that warp within months of installation, discolour when exposed to sunlight, fail to meet fire safety standards, and delaminate in wet environments. When these products fail it is not the Chinese manufacturer who bears the cost, it is the UK contractor who installed them, the merchant who sold them, and ultimately the consumer who has to pay twice – once for the cheap product, and again for the quality product they should have bought in the first place.

The second casualty is margin because, when the market is flooded with cheap alternatives, customers understandably begin to question why they should pay more for what appears to be a similar product. Even manufacturers who refuse to compromise on quality can find themselves squeezed, unable to command the premium their products deserve because the market has been conditioned to expect rock-bottom prices.

The third casualty – and this is the one that keeps me awake at night – is the erosion of domestic manufacturing capability. Every time a UK manufacturer loses business to a cheaper import, they lose not just revenue but capacity.

They lose the ability to invest in new machinery, to train apprentices, to develop new products. Over time, entire supply chains can wither and, once that capability is gone, it is extraordinarily difficult to rebuild.

The challenge of selling service and quality
This brings me to the central challenge facing businesses like ours – how do we sell service and quality in a market that has been dragged down by low-cost products? The honest answer is that it is difficult, because quality is not always immediately visible to a customer who compares 2 quotes for wall panels and sees a price, not a specification.

Customers tend only to see a number, rather than the years of R&D that went into ensuring the product will still look good in a decade's time. They see a cost, not the service infrastructure that ensures they receive their order on time, in full, and with the technical support they need to install it correctly.

Service is even harder to sell than quality because it is intangible until it is needed. When everything goes smoothly, good service is invisible. It is only when something goes wrong – when a delivery is late, when a product is defective, when a specification needs to be adjusted at short notice – that the value of a strong supplier relationship becomes apparent.

But by then, the purchasing decision has long since been made, and it has usually been made on price.

Our strategic response
At Rearo, we made a deliberate decision some time ago that we would not compete on price alone, allowing ourselves to be dragged into a race to the bottom that would ultimately destroy our business and leave our customers worse off.

Instead, we chose to move upmarket, to innovate, and to differentiate ourselves through quality, service, and sustainability. The most visible impact of this strategy is our product innovation with the launch of several higher-end ranges.

We have also invested heavily in our production capability, and our transport fleet, with 8 new delivery vehicles and live distribution tracking software that gives our customers real-time visibility of their orders, and we have expanded our commercial team, bringing in new talent and new perspectives.

Equally importantly, we have deepened our relationships with our suppliers, recognising that a resilient supply chain is just as crucial as a strong customer base. When we visit our suppliers in India, Turkey, and Ireland – and we do so regularly – we are checking on quality, but also building the kind of partnerships that ensure we can deliver for our customers even when the wider market is struggling.

The broader industry context
The UK construction industry has endured a torrid few years with the Covid pandemic, which disrupted supply chains, halted projects, and created uncertainty that still lingers. Brexit introduced new trade barriers, regulatory requirements, and costs that have made it harder for UK manufacturers to compete and the wars in Ukraine and Iran have sent energy prices soaring and disrupted supplies of key materials.

Against this backdrop, the flood of cheap imports feels less like fair competition and more like opportunism. When domestic manufacturers are already struggling with higher energy costs, higher labour costs, and higher compliance costs, the arrival of products that benefit from none of these burdens creates an uneven playing field that threatens the viability of UK manufacturing.

The case for optimism
Despite these challenges, I remain optimistic about the future of UK manufacturing. At Rearo, we saw our order book increase by 60% between June and July, with strong performances in the hospitality sector driving growth that has exceeded our expectations.

Our pivot towards commercial markets – supplying products for hotels, restaurants, and social housing – has opened new opportunities and reduced our reliance on the retail trade. We have achieved this by competing on value rather than price and by targeting harder-to-source elements of construction projects, including HTM worktops, lockers and specialist components.

In doing so we have taken a calculated risk by positioning ourselves as a supplier of choice for customers who need solutions, not just products.

The lesson, I believe, is that differentiation is possible even in a market that has been dragged down by low-cost products. It requires discipline, investment, and a willingness to walk away from business that is not profitable, as well as taking a long-term perspective, rather than a focus on short-term wins. 

Above all, it has required us to be confident in our products, people, and in our value proposition.