A few years ago I celebrated new year with an old friend, a senior chap in the corporate world, who told me that in the twelve months ahead house prices were set to fall 10%. Sheepishly, I replied that if that was the case then wouldn’t they already be down 10% as markets adjust instantly to reality?
Put another way who would buy a house today if it was a sure thing that one could get it for 10% less in a year from now? In actual fact house prices didn’t fall that year but I mention the story not to show how my friend was wrong - he is a very clever fellow (and he may even be reading this blog) – but to illustrate that even clever folk are not very good at forecasting markets.
So when I read the financial media commentators telling us in their new year pieces that we are set for a double dip recession, markets are going to struggle, the euro area is about to implode and we are all in for a horrible 2012, I refer you back to previous new years, and previous forecasts, which, like my house price story, turned out in the end not to be the case…but commentators still have to write something to fill their column inches.
Take ten economists and you will get ten forecasts. One of them will be correct and claim the glory of saying “I told you so”. The other nine were wrong. Yes, one of them was bound to be right but that may well be more a case of chance than good judgement. In real life it’s surprisingly difficult to predict the future. If you want proof of what I am saying just go back one year and read the forecasts for 2011. How many of them came true? Not many I bet.
Take the hardwood commodity market. Every day I hear from suppliers that this, that or the other is going to influence prices over the next few months. Invariably, they all fail to take account of unknown factors, for however close one thinks one is to information the reality is that one person alone is rarely able to gather a comprehensive view. Markets are usually unimaginably complex, which is why forecasting is a fraught business. Caution favours predicting the continuation of an existing trend; in actual fact, if the science of economics really followed that rule then it follows we would all be millionaires!
So readers, take your festive break in peace. Don’t fret over the media’s endless, gloomy, apocalyptical sages, and feast yourself instead on the more comforting thought that nobody actually knows much about what is coming next. Best response to doom mongers is to enjoy what you know you have. Drink a toast to the present this festive season!
I am writing this blog jet lagged, at four in the morning, from the small rural town of Rivera, five hundred kilometres north of Montevideo, in Uruguay, South America. I am here as the guest of the extraordinary Otegui family because twenty two years ago they had the revelatory idea of purchasing farmland in order to plant on it a sub species of eucalyptus, called Red Grandis, on what was then a barely wooded terrain of rolling green fields.
Today that same location is home to 75,000 thousand acres of Red Grandis plantations, supporting 11 million trees, situated on a transformed, densely forested landscape that has grown entirely as a result of human intervention. The gigantic Red Grandis trees, with skilful nurturing, are growing up to fifty meters in height, eighty five centimetres in diameter and can produce clear, red hardwood logs as long as ten meters that to all intent and purpose outperform most traditional tropical hardwoods known to our industry. And the best bit…due to vigorous replanting they will never run out.
For me and my friend and colleague Jeremy Bristoe, hardwood traders for most of our working lives, the place is a revelation. Years of defensive marketing, enthusiastic to justify the sensitive exploitation of nature’s tropical forests, become gently obsolete in these inspirational manmade woodlands.
And it gets better still…local wildlife appears to thrive; the plantations provide habitats for birds, reptiles, small mammals and insects. The practice of leaving prunings on the forest floor helps to support a haven for biodiversity in what was once a relatively lifeless green pasture. As if that wasn’t enough community bee hives prosper in the woods as part of the Urufor family company’s community welfare programs.
Today, the ultra-modern Urufor sawmill is producing anything from logs for Asian customers; to lumber; to high tech, laminated scantlings for the UK window industry. And it’s all powered by a state of the art, twelve megawatt, biomass fuelled power station – an adventurous $30 million investment - that ensures that every last grain of the logs is utilised to provide enough green energy to power the sawmill and the local town.
What brought me to Uruguay was the confidence that the Red Grandis, with its tight grain, high grade finish and inherent durability, is a revolutionary red hardwood. Plenty of Timbmet’s UK customers are already using it, testimony to its quality. FSC environmental certification doesn’t sufficiently acknowledge that here we have a timber that questions the very notion of ever using hardwoods from tropical forests again!
I ask myself what is the key ingredient to the Urufor brand of forest sustainability? The answer, I believe, is family. The business is managed by a hierarchy of six brothers from a family of ten. They know well that one day it will pass to an emerging younger generation of no less than 48 siblings and cousins, already growing quickly to become adults - in harmony with the Red Grandis - to nurture the next generation of this very environmentally friendly, high value, tree farming.
I am witnessing the future here in Uruguay for a family business that is an inspiration for our UK timber industry, and Timbmet’s family of customers that we are so proud to continue to service.
Biomass production is one of the more topical debates in our industry today. If like me you hardly knew what this was until recently, allow me to explain; biomass is another name for wood fibre; often waste wood products but including timber of all qualities, more often than not sourced direct from natural forests.
Traditionally in the UK a relatively modest scale biomass collection system existed, chipping wood and selling it to panel producers for the base content material of MDF/chipboard and the likes.
With the advent of the carbon economy and climate change debate the biomass industry has mushroomed, largely since someone somewhere came out with the bright idea that burning wood waste to generate energy was carbon neutral. The simple logic of this theory is that the trees that supply the biomass regrow naturally. Forests effectively suck back in all the CO2 that wood burning power plants emit into the atmosphere.
Sounds like a nice, round, clean theory. Naturally the power generators, and the logistics operators that service them, like to think so because with the encouragement of our government there has been an enormous uplift in the amount of biomass burned to generate our electricity. More is planned.
In actual fact there is a bit of a problem…isn’t there always? In the UK we are burning far more biomass than we are growing trees…so we import the stuff from other countries. Somewhere in the debate the logic went wonky because the problems of overseas deforestation were simply ignored. In actual fact we are decimating healthy forests in other areas of the world in order to do the right thing for the UK environment. Inconveniently, deforestation does not respect international borders.
The good news is that there is a solution, although a sceptic may argue we will never live long enough to see it implemented. Biomass can be sustainably harvested from natural forests but only in moderation. A good, independently certified forestry regime, such as FSC, can be implemented to guarantee good practise. The bad news is that to do so is expensive. It’s much cheaper to clearcut forests - out of eyeshot of course - and trot out a nice sounding theory that burning biomass is carbon neutral.
Just to give you a sense of the potential scale of this problem; the UK government alone is talking of burning many tens of millions of tons of biomass every year. That’s a lot of someone else’s forests going up in our smoke based on a rather dodgy theory that is supposed to help save the environment!
One of my first duties as I established myself in Timbmet
was to take the chair of the company pension fund. It was a cushy number to say the least
involving twice yearly meetings, a decent lunch spread, and a rather dull
review of the markets. Back in the
1990’s Timbmet’s scheme appeared to be grossly overfunded, so much so that we
were effectively forced into a contributions holiday by the then, light touch,
How times change! Overfunding gave way to stock market crashes;
a certain Mr Maxwell raided his funds undermining trust in all schemes; and
actuaries realised that people were living longer. All of a sudden the cosy surplus was a gaping
deficit. It was only a question of time
before one of the major platforms of my philanthropic predecessors at Timbmet
had all but collapsed and final salary pension benefits ceased from that moment
That was six or seven years ago. I looked on in amazement as the whole private
sector clamoured to the same, sad outcome whilst the public sector hurtled on
seemingly unaffected. Only now the
chicks have come home to roost with the realisation by our coalition government
that something has to be done to manage the colossal financial time bomb of its
public sector pension liability. Or has
Before we jump to hasty conclusions on the matter there is
one question I want to highlight that seems to have been rather ignored in the
debate so far. Perhaps final salary
schemes are unaffordable but does anyone actually know for sure? Measuring future pension liabilities is a
very tricky business requiring assumptions on pivotal forecasts such as
interest rates, inflation rates, investment returns and bond rates, going
forward up to forty years.
Actuaries dazzle us with all the most complex formulas ever
invented to forecast a fund deficit; but regardless, adjust only marginally any
of the above inputs and the outcome can swing massively up or down. Can you tell me the likely rate of inflation
in ten years’ time? The Bank of England
Now anyone who follows financial markets knows that nothing
upsets them more than uncertainly. At
the slightest whiff of a financial mystery accountants are all over the issue,
and once the grey suites arrive caution becomes the key theme. Every forecast will always be worst case
scenario…hence the apparently huge deficits that have annihilated the private
The ironic aspect of all this is that the previous less
highly regulated, less bullet proof pension regime provided millions of private
sector workers with a financial future, where now there is none. The red tape imposed to protect pensions from
uncertainty has been so draconian that no private sector employee in their right
mind would now offer cover. Lighter
touch regulation was far more bearable even if the risk of default to a small
minority of workers might have been higher.
Conclusion; surely we
shouldn’t be undermining pensions in any sector but instead looking to solve
the tragic situation whereby private sector pension schemes have been
effectively regulated out of existence.
There has been some media talk of late about the most effective way to complain to a company. Must be a recession thing I guess. One recent study suggested that it's a good idea to contact the big boss*. With thousands of customers to satisfy I naturally mused on how I would react if I started to get lots of complaints in my mail box. Allow me to share with you my thoughts.
Let me start by reporting I actually get very few complaints. That is not to say that no customer has a problem with Timbmet. Obviously working with timber, a natural product, we do get problems, but very few of them ever reach my desk. We have an effective system which I believe is based on the notion that the customer is always right, even when they are wrong. That way at least we get the next enquiry.
Should I assume that we solve every complaint to the complete satisfaction of the customer? Well I hope not, because in actual fact when complaints do come my way I often respond in ways that might surprise you. For example, I have a very clear idea in my mind as to what constitutes an ideal customer. If the complainer is patently way outside that profile I might just decide I couldn't care less. Let him take his business elsewhere - I am the boss so I do have the power to say "sorry sir, not interested".
Admittedly, the more likely scenario is that I can solve a problem that few others in the organisation can address as quickly and efficiently. Moreover, I would very much like to know about complaints because only by understanding what goes wrong in an organisation can one get a grasp of how to put things right. Occasionally customers do get on to me and I can blast through the normal channels directly to solve their particular problem.
Would I positively advise a customer to email me if they had a problem with Timbmet? I think on balance the answer would be yes, provided the normal procedures were close to exhaustion. Personally I enjoy the close contact a complaint can bring with a customer, which avoids the ivory tower syndrome of the boss sitting in his office and not really knowing what is going on in the real world of day-to-day commerce.
Will this blog lead to an avalanche of emails from disgruntled customers desperate for satisfaction? Your call valued reader...
Running a "successful" timber business over the past two years has not been easy. If the media are to be believed it's about to get a whole lot harder with a construction industry led, double dip recession about to descend on us.
How should we respond? Probably by starting out defining the word "success". I spend a lot of my time pondering this one because when I use the word I don't really mean money (bad sign in a businessman I know).
Many funding institutions see success purely in terms of profit and loss, yet I know of extremely admirable businesses in the timber industry that never make money. They do 'good' in terms of the contribution they make to our world often by preserving old skills, innovating or just simply being extremely pleasant to deal with.
For those of us in business that do need to make money, is success only about pleasing customers? I would hate to think that we make profit yet customers despise the company. Likewise it would be unfulfilling to only make money at the expense of employing miserable staff.
So what the heck is success then? I think in Timbmet it's a two dimensional challenge. It's about a happy community of people, the staff, pleasing a loyal group of followers, the customers. If this sounds simplistic let me tell you that in my experience it's very hard to achieve. Very profitable companies can have very miserable employees, and many happy companies have gone bust.
In commerce it may appear that money is everything but how many wealthy people get their private lives awfully wrong? Did they forget that happiness has to come first? I say the best advice to anyone worrying about the looming threat of a further recession is try to stay happy and enjoy what you do.
Personal success should ultimately be measured by the proportion of my day spent smiling. I try to be good to people, both colleagues and customers.
It may sound awfully flowery and twee but my experience tells me that I am least successful when I fail with people, not money.
Over twenty years in the timber industry has taught me that although progress has been ever so slow, the emerging outcomes are very positive. In forestry terms - where change is measured in decades - my relatively short career has witnessed a transformation from the twentieth century, with the global hardwood industry literally raping environmentally sensitive forests, to the twenty first, learning how to protect ecosystems whilst harvesting our timber from environmentally benign sources.
In this article I will explain how I see the next twenty years for hardwood sourcing, an age I confidently expect to be a golden one for an industry with little to fear and much to gain.
Back in the early 90's I was sent on my first overseas mission to investigate why my company was taking so much flack for selling Brazilian Mahogany. It didn't take long to find out. Forestry management plans were bogus works of fiction, the Amazon forest was being wrecked by loggers who were only interested in a few valuable trees per hectare and the rights of indigenous peoples were disregarded literally at the barrel of a gun. Hardly surprising then that today we sell little or no Brazilian hardwoods.
The story was similar in many other forests of the world, particularly, though by no means exclusively, in tropical developing countries. The path to change has been all about scrupulous supply chain auditing, the rise and rise of certification and the more recent, and I think most encouraging development, the advent of plantation hardwoods.
These days why would any enlightened customer ever need to worry about the environmental provenance of hardwoods? Certified timbers are plentiful and serve every sector of the market. There is no excuse for not insisting on high standards and there are few grey areas...either its independently certified or its not, it couldn't be much simpler.
Even for tropicals the FSC mark has truly come of age...so much so in fact, that one can now begin to exceed certification standards if, like me, one believes that FSC is only a stage on the road to true forest sustainability. The ultimate game plan has to be to close the world’s remaining sensitive tropical forests to all forms of logging, certified included, and concentrate hardwood production on either designated production forests or, better still, plantations.
There are several examples, already in large scale production today, where concerned purchasers can procure fine utility hardwoods; teak, mahogany substitutes, poplar and walnut, from purpose planted woodlots; tree farms designed to divert production pressure from natural forests. It's all certified. My view is that so long as plantations haven't been planted by tearing down natural forests they are a near perfect source.
For applications where plantation timbers might not be available, certified timbers come into their own in engineered formats. High-tech methods for gluing small pieces of wood together to form long, wide, strong and often very attractive looking sections are environmentally sensible, technically efficient and very cost efficient.
There are few applications that don't lend themselves to engineered timber solutions. Tell me how nature alone can provide long lengths of sap free walnut in wide sections, or clear-faced decking comprising of mill-run, unsorted teak - saving the clear lengths only for exposed faces. It’s clever and it’s gradually becoming commonplace.
The Golden Age for hardwoods is here. With government building regs dictating ever more rigorous standards of environmental performance the hardwood industry has all the answers. Whether it’s plantation teak, Walnut from hybrid trees, FSC certified mahoganies or engineered handrails, there are amazing products readily available from a transformed industry that has long since learned that just hacking trees out of tropical forests is no way to build a greener future.
I note in this week's news that a letter written by Prince Charles - described by a High Court judge as "unexpected and unwelcome" - led to the cancellation of the multi-billion pound Chelsea Barracks development in West London. This royal faux-pas will bag the developers millions in damages. It makes me question what was HRH up to? You see, I thought the days when sovereigns decided such matters were long gone but obviously I must be mistaken.
All right, I concede, the Prince didn't actually decide the matter, and ironically he was making a point about the aesthetics of the development that many might well agree with, however, we have democratic processes for deciding these things and surely part of living in a free, open and fair society is that we are all equal - Prince Charles as well - and we must all live with decisions we don't necessarily like providing they have emerged from a due process. This development was approved by all the proper democratically elected authorities.
I don't mind confessing that one of the reasons why this matters so much to me is self interest. Many of Timbmet's customers would profit greatly from this particular high-end development at a time when work is not generally so plentiful. For the timber industry that means a lot of hardwood and veneered boards would have been sold.
The high-end joinery sector benefits massively from schemes like Chelsea Barracks. Candy and Candy, the developers, already have a track record for bringing quite extraordinary innovative projects to the London residential property market. Lord Rogers, the world renowned architect, can also claim a proven record of designing buildings that truly enhance London's architectural pedigree. These apartments would have challenged the core skills of British woodworking with groundbreaking and extravagant designs. The impetus an exclusive development of this nature gives to our industry drives standards of global excellence that we badly need to nurture.
As frustrating as it may be that UK property developers can be delayed for years by our cumbersome planning process, when a decision is finally generated it's really unfortunate that HRH goes and sabotages it. So here's my big idea; lets go and sue Prince Charles for the business we have all lost as a result of his letter writing. No doubt he thinks he has done a good turn for London's sky line. I think he has let our industry down badly by interfering in a process that society has decided is the democratic one which should not be meddled with by privilege laden princes.
One of the past traditional treasures of Timbmet was the "homegrown" yard on Cumnor Hill. There one could stroll along dirt tracks, through lines of neatly laid out boulles - mostly oak but other species too - savouring the aroma of timbers slowly drying in Oxfordshire's gentile rural surroundings. Perfectly stacked, 'through and through' sawn logs might sit literally for years until they were considered ready for kilning and selling to discerning customers.
It's all gone now, devastated in the last decade by cheaper but actually higher quality square edged sawn packs from Eastern Europe; no split ends, no checks, no knots, no bends, no smells...just metre after metre of perfect, mild oak ready for use with frankly far less trouble for the purchaser.
Two trips last week reminded me of the old yard. I was in Poland, the guest of one of our suppliers. One could rarely, if ever, expect English logs to get close to the quality I saw there. The Polish product is wide, clear, straight and flat with so little defect that the boards could almost have been tropical. The forests of Eastern Europe have presumably been left for generations untouched in order to grow such fine timbers.
The UK woodland story was, and still is, very different. We have been raiding our best trees for centuries clearing the prime stands for shipbuilding, stately homes, educational institutions, furniture and last, but by no means least, naval warfare. Our built heritage is there for all to see but sadly in the forestry department it is woefully diminished.
"Not entirely so" says Philip Koomen, on my other visit this week to his admirable furniture workshop in Checkendon. There you can savour craftsmen built tables, benches, chairs and other quality pieces all made from character English timbers carefully seasoned in Philip's very own backyard.
Of course Philip is correct and there is still much to be cherished in home grown species - his furniture more than speaks for itself - but alas Timbmet's large scale UK "homegrown" production is gone forever replaced by the worthy foreign alternative.
If it is character one seeks then one must search small scale and locally. There are great UK sawmills where local grown timbers can still be found. They can be pricey but then so they should be...nature's character product, as I witnessed close up this week, remains well worth paying for.
You wouldn't expect a general election to pass without some political comment from any self respecting blogger. Now don't get too excited...I have no intention of telling you who to vote for. What I can reveal is my personal recommendation on where I believe the next government should first look for all those much talked about savings in government spending.
One of the relatively minor stories to hit the headlines this election week concerned an equal pay claim in Birmingham City Council. An incidental fact to emerge - to my utter amazement - is that the workers who empty the street bins in Birmingham earn £32,000 a year!
I have always been one to believe that there should be a reasonable, minimum wage for all, but I still can't help comparing the Birmingham bin emptiers to very highly skilled artisans in my industry, who will have trained for years to learn their craft, and rarely earn as much as £32,000 a year. By the way there will be a generous pension attached to the local authority income as well
The artisans of the timber industry diligently pay their local taxes from their sub £32,000 a year incomes to fund, amongst other things, the emptying of street bins...a vital task I am certain but with great respect to the folks who do it not one that requires the skill-set of a joiner, carpenter or cabinet maker.
How can local authority pay scales have become so out of kilter with private industry? How can we have an economy that so undervalues manufacturing against the public sector? The answer is pretty obvious...it's not really economically viable at all; it's economic madness and an abuse of public finance. The challenge to our new government, whichever persuasion they happen to be of, is to address this wrong.
Everyone seems to agree that government spending is too high. Doubts have been expressed about where wastage can be found. May I humbly suggest to our newly elected Prime Minister that he can start the search for savings in the street bins of Birmingham?