Interviews

The Impact of Brexit on the U.K Skate Industry

On the 23rd of June 2016 the United Kingdom held a referendum on its membership of the European Union. The result of that referendum was, to the disappointment of the majority of the skateboarding community, to leave the E.U. We decided to catch up with Wes Morgan, the owner of Rock Solid Distribution, to get his insight on the potential impact of Brexit on the U.K skate industry

Interview: Matt Broadley | Illustration: Mike O’Shea | Images: supplied by Rock Solid

The answer, I expect, is pretty obvious. For the sake of clarity, which way did you vote in the referendum?

(Laughs) I voted remain.

Can you explain the reservations you had going in to the vote?

Personally and business wise I was remain, because I like being a part of the European Union. I always have, I like the fact that we could choose to live in Barcelona if we wanted and visa-versa. We’re an island and I think it’s nice that people can travel here and become a part of our society, I never saw a problem with it.

Buttergoods rider, Casey Foley, ollie. Ph. Jake Mein.

What was your immediate reaction to the election results?

I had actually just got to Los Angeles at the time and was at a party, my girlfriend text me the result. Throughout the day it was all looking so positive, the pound was getting stronger, and it seemed to be going how we wanted it to go. I felt like crying, I was so bummed. I was a little bit jet-lagged and tired and just thought ‘oh my goodness!’

“The only positive I can see in the British skate industry, is stores can now sell into Europe a little more as they’re more competitive.”

It was good, however, that a lot of us from the U.K were there in America, because it was big news in L.A on that Friday. They hadn’t really heard anything about it until the results came in, and it was massive news there. This was useful when speaking with companies, because obviously we had to try and get extra discount as we knew the pound would fall, some companies were receptive and some were not. The brands work on slim profit margins, we work on slim profits margins, so there’s not a lot of room in some cases. It was just a disaster, I just kept on apologising for being British. Never trust your Instagram or Facebook feed!

What are the earliest impacts you’re seeing on your company?

Straight away the pound dropped, I think it was 15% overnight, so it was instant. Unfortunately we had to put our prices up straight away. We were working it out on the base rate that £1 gets you $1.30, that now looks like we were working it out wrong. Because the pound has dropped so much since then, it looks more like £1 gets you $1.20.

I never thought that I’d be following the markets and the exchange rates so much when I got into the skateboard industry! I speak with a current exchange company everyday and the picture they’re painting at the moment is really not very good. Unfortunately it means that pricing may have to go up further.

The only positive I can see in the British skate industry, and this won’t be for distributors, but it might for stores, is that they can now sell into Europe a little bit more as they’re a bit more competitive.

The Vacation pro, Jason Spivey. Backside disaster. Ph. Ishie

Have you had to make any cutbacks so far?

Yeah we have, an employee who worked with us for six years left, we had a replacement lined up for them but we were unable to offer them that job in the end. Our profit margins have been slashed by almost 20% so we have to be really careful. I’ve cut print advertising in all publications going forward, I love magazines – I’ve never thrown away a skate mag in 28 years! So that’s really unfortunate. We’re also trying to keep lower numbers of stock and just generally make the business a lot leaner. I love working with smaller brands too, and they really don’t have much profit margin to work with, so now I have to be a bit more cautious with things like that.

What long term effects do you expect to see?

I think we’re going to have less people working here, be a lot leaner, we’ll probably keep less stock, and unfortunately the price of a hat, a t-shirt or board is definitely going to go up. I was speaking with a distributor friend last night, and if the pound keeps falling then sadly the prices are going to have to go up again.

“The way I would put it is that it’s a complex truth to remain, and an easy lie to Brexit.”

I mean I don’t have a crystal ball, there’s huge uncertainty regarding how the negotiations to leave will go down and what kind of deal we’re going to get. It’s a very complicated thing to unpick, it’s going to take years. That means there will be uncertainty for years, I can’t see the pound bouncing back for a good two to three years. It’s a nightmare. The way I would put it is that it’s a complex truth to remain, and an easy lie to Brexit.

What knock-on effects do you see for the U.K scene?

At the moment I think boards have gone up roughly around about £5 retail. So say there’s a lad who bought six boards a year last year, is he now going to be buying only five boards a year this year? People can say it’s only a fiver, but no one is getting paid any more, things are going up in price but wages aren’t increasing. I would imagine that people will buy less product, that’s the main thing I see.

This year two big skate shops have gone out of business, the industry is definitely tough at the moment. And with the price increase we don’t really know how that’s going to affect businesses. Obviously we hope that people will be able to afford the extra fiver for a board, but often it’s younger people without a lot of money – so that extra fiver can mean a lot to them. We’ll just have to see what happens.

Magenta Skateboards' Soy Panday, back tail. Ph. Jean Feil.

Carrying on from that, do you see it as being another kick in the teeth for smaller independent shops?

Unfortunately it could be, we’re a small independent distributor and whilst I think everything could be ok it’s definitely going to be tougher. Things like hooking up sponsored skaters, they may get less product now, stores might also have less product to give to their shop riders, all that sort of stuff will have a knock-on effect.

Magazines and websites are also likely to suffer because when times are a lot tougher marketing budgets are usually the first things to go. It won’t just be skate stores, there will be a knock-on effect throughout the whole industry. The U.S and European companies will be selling slightly less in the U.K because people like myself are being a little more cautious. It will have a global knock-on effect.

“Personally I think VAT should be cut, I don’t think it will happen, but that would help”

You touched on this slightly just then, do you think it’s going to be harder for U.K skaters to get hooked up on flow deals?

I think that people will always get hooked up, but they’ll get slightly less of a deal and less people overall getting hooked up. So maybe one kid is super good, but he’s not quite as good as this other kid and he doesn’t have such a good style so he won’t get hooked up. It’s not fair on those people but it’s the reality when product becomes more expensive and profit margins become slimmer people will lose out somewhere along the line.

What solution would you like to see proposed? What would help your business?

Personally I think VAT should be cut, I don’t think it will happen, but that would help. There’s not a lot we can do because it’s in the hands of governments and markets. With the exchange rate obviously I’d like us to go back to normal but that’s not going to happen. I guess it’s just a case of us being cautious and careful and analyzing how to save money in certain areas. Ideal situation, I wish the bloody referendum had never happened! Or that we voted remain. Now it’s just down to adjusting and living with what the British public voted for.

Josh Anderson of The Killing Floor, kickflip. Ph. Zachary Snellenburger.

Are there any positives at all you can see from this situation?

Right now, as a U.K distributor I can’t see any positives, the glass is always half full for me. The only positives I can see is that at least I can analyze my business, and when the exchange rate picks up I’ll have had three years of experience running a business as lean as possible. So it has helped me to analyze stuff, but that’s the only thing. I guess, as I mentioned, U.K stores selling into Europe, and maybe British skate brands become a bit more competitive? I have to be honest, not a lot of positives, virtually none!