U.K. Lighting Association Chief Sees Bright Future for U.K. Industry

“Our quality versus price is much better than China's.”

Jonathan Lucas, president of the United Kingdom's Lighting Association and managing director of Elstead Lighting Ltd., feels bullish about the British lighting industry. In an interview with CENS Lighting Magazine during the Hong Kong International Lighting Fair 2010 (Autumn Edition), he predicted that inflation in mainland China would make Chinese products less competitive and that the British government's strong assistance and support for the nation's export manufacturers would inspire more British lighting enterprises to set up manufacturing in the U.K. Excerpts from the interview:

Q: What is the general sentiment among British lighting manufacturers about the economy right now?

A: We see that the economy has stabilized and the lighting market is showing growth and improvement in 2010, though at only small percentage point of growth. So, new opportunities are appearing in the market.

Q: People are talking about the European debt crisis. Is that issue taking a toll on the British lighting industry?

A: A little. I think consumer confidence is often affected by the media, statements and news about various aspects going on in the U.K. or in Europe and the world. That could somehow affect the stock market, which in turn affects people's pensions and other aspects. But I think the worst of all that kind of news is over. The British government, which came to power in May this year, is working hard to keep costs for all sectors as low as possible, and to repay the debts that have accrued over the previous two years. In the overall economy, this is giving stability. Consumers always like to see stability, and then they'll be happy to go spending.

Q: How is your company coping with the economic turbulence?

A: We spread risks by selling around the world. Traditionally, a big percentage of our business was from the U.K. and Ireland markets. But since we started exhibiting in international shows, we've started building our export markets. Now we have distribution in such countries as Poland, Russia, and Japan. We are starting distribution in Belgium and France in addition to developing more business with existing customers in Finland and Scandinavia.

We came to this show last year and we're here this year. We also did in Frankfurt this year and we'll be in Milan and Warsaw next year. Now, we are considering exhibiting in Russia. We go to these shows with the goal of increasing exports to 50% of our business.

Q: Are other members of your associations taking action to diversify the market as your company is doing?

A: No. Not too many. The majority of British lighting companies are importing products from China, really giving them no point of difference from every other company [at the Hong Kong International Lighting Fair].

Q: Many of your association's members are importers. Will the British government's austerity measures affect them?

A: I don't think they would dramatically [affect their business], because the government has taken many measures—for example, to change import duties. But they are not producers as my company [is], so we get more government support and help for investment in capital equipment and for [selling] machines to overseas markets.

The British government is doing a lot to support businesses that want to export and have either production or design within their organizations. For my company, we are a manufacturer still in the U.K.—almost the last remaining one. Just recently we invested more than US$100,000 in new CNC machines, and we're buying more equipment. Our manufacturing is more and more high-tech to compete worldwide. Even with China, we have to try to compete.

Q: Do you think government support is helpful to your industry?

A: Absolutely. Although there are not many manufacturers in the British lighting industry now, in other industries in the U.K. there are. So, in the furniture, automotive, and engineering research businesses, there is a lot of skill and there are many companies that can sell their products and services around the world. The British government's initiatives help not just lighting companies, but every company that has skill either in production, design, or advisory services, to expand their markets worldwide.

Q: How many members does your association have now, and how many of them are manufacturers?

A: The Lighting Association has just under 200 members, and probably 40 of them are manufacturers.

Q: Why do importers outnumber manufacturers?

A: Most of them are importers and distributors just because of, I think, the perception that it is not competitive to try producing in the U.K. Investment to start a manufacturing business in the U.K. is very high [compared to] turnover and profitability. So it doesn't make a good business model in many people's eyes.

In traditional and residential lighting they really assume we're the only company [producing] for the [U.K] retail marketplace. But in commercial lighting, project lighting, and LED lighting fixtures, we have quite a strong manufacturing industry. And these members of the association are doing very well in the international market, not just because of the prices they [offer] but also the quality of their products and the techniques and advantages their products are designed to [provide].

Q: Is the lighting industry in other European countries similar to the U.K.'s in terms of having fewer manufacturers than importers?

A: Absolutely. I think that could be said of virtually every [European] country. Traditionally, Spain was the home of a large portion of European lighting manufacturers, and Italy [had] more than 1,000 [of them] 15 years ago. Now, they probably have only 250 manufacturers because they just could not get enough business. And they could not compete because China came on very strong in terms of competitive prices.

Now the situation is beginning to change a little, because the costs are changing much in China but not much in Europe. Chinese workforces are demanding higher pay very rapidly and the Chinese government is enforcing better working conditions like holidays and sick pay. [The result is] more parity with the Western world. So, we'll see the pattern [that emerged] many years ago to Japan, then Taiwan and South Korea, now happening to China. China will become a developed nation.

Q: Are you worried about the “fewer-manufacturers-than-importers” situation, and do you think the reminbi plays a major part in making Chinese products less expensive than Europe's?

A: It does, for sure. But I don't know what the correct value of reminbi should be. Clearly, it is supporting China's exports in a way which many Western countries find unfavorable for them. I know the U.S. government is putting a lot pressure on China to address the situation. And, of course, if it is addressed all the goods imported into the U.S. from China will suddenly increase prices. In our situation, it would be a good thing for us if it happens. We'll then be more closely competitive to China in producing products because the lead time, cost of shipping, and import duties will start making it an inexpensive option to get supplies [at home].

Q: As president of the lighting association, are you worried that the U.K.'s lighting industry will eventually become “hollowed out” because more and more of the manufacturers outmigrate?

A: In fact, I would expect that more people would start going back to producing things in the U.K. again because of the inflationary pressure coming out to the Far East. I'm sure we'll see more and more companies going back to produce in their small workshops and large factories again. I think the government will also want to promote this, because putting people back to work is one of the most successful ways of creating jobs and wealth in the country.

Q: Today is the last day of the four-day fair. Have you seen more visitors this year than in the previous two years?

A: We haven't had more in quantity, but we have had more in quality. We're certain that we're going away from here with a lot more customers that will actually start trading with us, rather than people just inquiring about prices, because they can see our quality is very high and our price is very competitive. Our products are not as cheap as China's but our quality versus price is much better than China's. And our shipping time is very good.

The middle and upper end of the market, which we are aiming at, is not about volume, but about quality and design. In this area, we have built a reputation and that's what we are strong for and stand for. So, we've been very pleased with the result we have here.

Q: This is the third year your company has come to this show. Does that mean your company is striving to develop business in the Asian market?

A: Yes. We had our first Chinese customers this year. They want to stock the products we display here. They have five showrooms in Shenzhen. That's a breakthrough for us because, historically, business with China is about China selling everything to the U.K. So, having a U.K. business actually making sales to China is really a nice [thing] to see. You can see as a consumer market China is developing very fast, looking for luxury goods including lighting fittings.

Q: How many British exhibitors are in the show this year?

A: I think there are five in total, including three association members. After this fair the association will hold a meeting, at the end of this month, to discuss how successfully it [has been encouraging] other British companies to consider developing their export markets more and going to important shows, like the Hong Kong show and the Milan show, like we are doing. And we are inspiring more British companies to be aggressive and market their brands and names at shows.