Budget 2021: Manufacturers hope for confidence boost

Australian commercial furniture producer UCI is banking on a boost to business confidence on the back of the budget, but says more needs to be done to support existing manufacturers.

UCI managing director Tim Dyer at the furniture factory in Adelaide: ‘We’re not building space shuttles; we’re building a commodity-based product.’ Picture: Dean Martin

Leading Australian office furniture maker UCI saw sales collapse as the pandemic hit the economy but is banking on a big boost to business confidence, spurred by the federal budget, to return the manufacturer to pre-COVID ­levels.

The 40-year-old business, which has its main factory in Adelaide, said it hoped stimulatory budget measures — including the $22bn extension of the instant asset write-off — would support business spending, with a trickle-down effect to the furniture market.

“We’re geared around the office fit-out side of things and we can see it starting to bounce back now as confidence is improving,” UCI managing director manufacturing Timothy Dyer said on Tuesday night.

“The question is will it sustain. The proof in the pudding is business confidence from the budget. If that keeps business confidence there it should maintain and further improve.” On Tuesday Treasurer Josh Frydenberg said the manufacturing sector was crucial to Australia’s future economic growth.

The government unveiled a range of targeted measures to boost high-value local manufacturing, building on the $1.5bn modern manufacturing strategy announced in the October 2020-21 budget.

But Mr Dyer noted that for too long government policy has been focused on priming growth for advanced manufacturing rather than providing operating conditions to support the breadth of manufacturers already operating in Australia.

“There’s this segment of day-to-day manufacture that gets a little bit overlooked,” he said.

“We’re not building space shuttles, doing advanced manufacturing; we’re building a commodity-based product for the Australian market,” he said.

Mr Dyer said the plans to extend the temporary full expensing and loss carry back for businesses until mid-2023, forecast to provide another $20.7bn in tax relief, could incentivise businesses to spend on office upgrades.

“If the economy is booming and moving forward, that’s when people do proceed with spending on the workplace improving things,” he said.

But he warned the sluggish rollout of the vaccine risked crimping any potential recovery or return to the office across the cities.

“Until that’s resolved we’re at risk of snap lockdowns. That will be a significant disruption,” he said. The booming construction industry on the back of the government’s priming of the housing market is already squeezing costs for UCI, where some materials are 30 per cent more expensive than their pre-pandemic levels.

Mr Dyer said 30 per cent spikes in aluminium costs and a lack of production in Australia were putting increased pressure on the business’s bottom line at the worst time.

“One of the challenges for us as a manufacturer is our supplies are limited,” he said.

A worker sprays In the powder coating booth. UCI, an Australian business that provides fit-outs for offices is turning its production to make safety screens and antimicrobial benches for cafes. Picture: Roy Van Der Vegt

Not content to stand still, UCI is also set to pivot its manufacturing, in a bid to be stronger than when the pandemic started and claim a slice of the rapidly growing home office market.

The business also set out to pivot its office supplies operation to cater to the home office, a development that has come to the fore for the business.

In the early days of the pandemic UCI pushed into manufacturing antimicrobial surfaces and protective screens. The business is now evolving into the home office marketplace, with the launch for the business set for July.

UCI managing director Steve Chadband said the group was taking the traditional idea of an online store and merging it with a marketplace for solutions, installations and trades.

“We’ve continued our trend to be innovating to create a new stream of revenue that will develop and grow,” he said.

“When the commercial sector returns to some kind of new base level we’ll have two streams of revenue as opposed to a single stream.”

Despite the huge challenges to the business UCI, which received the JobKeeper payment across the entire period of the subsidy, has only had to let two people go following the payment’s conclusion.

“There’s very significant challenges in the commercial furniture world at the moment if you’re not thinking outside the square you’ve got some significant challenges,” Mr Chadband said.

The pivot is already under way at UCI’s Adelaide factory, where work has begun on producing components for new items as well as staging for assembling others.

“We’re expanding our product range, we’re doing some upholstery, the business is very much alive and kicking and innovating,” he said.

UCI owner Hermione Stewart said the idea of the home office marketplace came from requests from customers mid-pandemic who were buying items from their online store.

“People asked us to build a little office hub in their house that they could fold up and put away. We did a few of those and then our clients started requesting, as we were doing that, to build a small kitchen and do renovations,” she said. “Requests kept bleeding into others. We’ve done four or five kitchens, libraries, and executive dining areas.”

Originally published as Budget 2021: Manufacturers hope for confidence boost