That sinking feeling: Brexit threatens German bathroom connection
Dietrich von Gruben finds it distressing on a personal and professional level that Britain wants to leave the EU, but he accepts the decision with a qualification. “If you join a club you should also be able to leave it, but you should at least prepare a way or have an idea as to how you want to do it,” he says.
“I am quite anxious about what the complete lack of preparedness might mean for my business.”
The managing shareholder of Deba, a manufacturer of pre-fabricated bathrooms, overwhelmingly for the luxury UK market, says uncertainty over has left him feeling very unclear about the future. The mittelstand firm – one of the 3.3m small to medium-sized, often family-run, companies which make up the backbone of the German economy – currently relies on the UK for 70% of its turnover.
The factory floor in Salzwedel, Saxony-Anhalt, gives an insight into how British, or more specifically, London-focused the company has become since it entered the UK market eight years ago.
Two workers are painstakingly arranging a mosaic of hundreds of tiny Versace-designed grey and white patterned tiles. A welder stands by ready to seal it into the wall of one of hundreds of units the company is constructing for the Dubai-owned Damac tower block in Nine Elms, south-west London. Deba is also proud of having completed no fewer than 1,242 bathrooms for the Battersea power station conversion – “one of our biggest showpieces so far”, Von Gruben says.
Elsewhere a shower wall cut out of Thessaloniki Grigio marble is destined for a luxury development next to the Shard, for now the EU’s tallest building, which Deba is kitting out with 290 bathrooms. Signs pasted over the units read: “Wet plaster!” and “Don’t step on the ceiling!”
Von Gruben and other shareholders rescued Deba from bankruptcy in the early 1990s, transforming it into one of Europe’s leading bathroom specialists. It now has an annual turnover of €25m (£22m) and employs around 180 staff in and 50 in Poland.
Each week it transports around five lorryloads of ready-to-use bathroom units complete down to the last detail, including plugs and shaving points. Timing is everything. The bathrooms must arrive to fit into tight building schedules, and almost immediately on delivery, are lifted up and slotted in before the outer walls and windows are added.
Wind is the biggest day-to-day unknown. “Such an operation, involving a cube of up to 2.5 tonnes, is obviously precarious so you have to keep an eye on the weather,” explains Georg von Gruben, Dietrich’s son and business partner. These days, however, it is Brexit has far greater potential to blow the company off course.
“To try to guess is like reading tea leaves,” says his father. “Where’s the voice of reason? I think the only one talking any sense right now is the Queen.”
The Danish haulier DFDS has been in talks with Deba to try to establish a plan of action and intends to stage a dry run with customs checks based on WTO rules at the port of Calais. “It’ll be surreal to be effectively treated like a Russian,” Von Gruben says.
His son talks about the extensive effort the company has made to understand the British market since it first secured a licence in 2011. “The large number of regulations and provisions that deviate from German and EU norms … we had a few inevitable hiccups at the start, but this all comes naturally to us now, and for several years everything had been going swimmingly. Until, that is, Brexit came along.”
The company had already suffered from the sharp fall in the value of the pound after the 2016 referendum, which meant lower euro returns on jobs in progress that had been calculated in pounds. As soon as they were able, they adjusted their prices upward.
“You take things like that on the chin. You have to,” says Von Gruben junior. But what immediately concerns the company is the idea that its smooth-running operation might grind to a halt through no fault of its own. “Our bathrooms could get stuck at the border, in which case we may not be able to fulfil outstanding contracts. Delays on the building site translate into higher costs, and in the worst-case scenario, customers would jump ship,” he says.
Additional complications include the company’s supply chain, which involves bringing 10% of its materials – everything from fittings to water pipes – from the UK, but also from as far afield as Mexico and China, via the UK, to Deba’s headquarters in eastern Germany. “Once the UK is out of the customs union that could all be far trickier,” says managing director Henrik Dinesen, a Dane who visits London weekly to oversee the company’s current projects.
Von Gruben Sr says he has little choice but to remain pragmatic. He is preparing to set aside adjustment costs of around €1m, but admits he still does not know the conditions to which he will be adjusting.
“We have to be considering alternative markets, and expect to have to take stock and to power down our production while we consider what to do next,” he says. He is prepared, he says, to focus his attention closer to home, on less lucrative but more reliable sectors, such as German hospitals, care homes and student accommodation.
“And we have a great sense of responsibility towards our employees, who, I have to say, are remaining remarkably calm in the wake of such extreme indecision.”
€85bn Value of German exports to the UK in 2017
7% Proportion of all German exports that go to the UK
50% Estimate by German Economic Institute of potential fall in UK-German trade after a no-deal Brexit