Writing in the June edition of PBM, editor Paul Davies reflected upon the current uncertainty in the market…
A plethora of reports and survey results released over the last few weeks reinforce the somewhat paradoxical state of the industry at present. Against a backdrop of the deepening cost of living crisis, consumer demand for RMI work on their homes remains high — Rated People, for instance, reports that 62% of UK tradespeople said that 2021 was the “busiest year they’ve ever had” whilst 86% expect to be “very busy” during 2022.
Similarly, new build activity has seen a particularly strong start to the year. For example, data from NHBC shows that UK home registrations increased by 25% in the first quarter of 2022 compared to the same period last year, with private sector registrations a “key driver of growth” thanks to a 31% increase “as builders continue to respond to high consumer demand for new homes”.
While the latest S&P Global / CIPS UK Construction Purchasing Managers’ Index recorded a slight dip in April at 58.2, down from 59.1 in March, the figure yet again “posted above the crucial 50.0 no-change mark” as it has in each month since February 2021. The survey revealed that of the three main construction segments it monitors, the fastest-growing remained commercial work (index at 60.5), followed by civil engineering (56.2).
“The months ahead will undoubtedly be challenging yet the underlying resilience of the sector is of crucial importance — demand continues and opportunities are still there to be grasped, however hard they will have to be fought for.”
The point is reinforced in a recent update from the Construction Leadership Council’s Product Availability Working Group which states: “Most regions are still reporting strong demand on the trade side, particularly from larger housebuilders and for infrastructure projects including road building”.
As you will see from this month’s instalment of ‘The Pulse’, PBM’s monthly tracker of merchant sector sales and confidence, faith in the overall market may have dipped but the future sales expectations of individual businesses — though falling — remains at “historically high levels”.
This somewhat mixed picture is further reinforced by the Builders Merchants Building Index (BMBI) for Q1 which demonstrated that “the value of sales in the first quarter of 2022 was up by +17.7% against Q1 2021 (however) almost all of this was driven by price increases with volume rising by just +1.5%”. The report continues: “while the figures indicate a continuing demand for building materials, they also confirm price inflation as a critical issue, with the impact of rising energy, fuel and raw material costs on product price clear to see”.
Indeed, underpinning the “bumper quarter”, a record-breaking March clocked up the “highest ever total sales in the history of the BMBI”. Price inflation was the clear driver at +16.0% compared to volume growth of +1.5%.
As Mike Rigby, CEO of MRA Research which produces the report, says: “It’s been an uncertain start to 2022 with the outbreak of war in Ukraine further impacting energy costs and inflation. But the quarterly figures suggest that — for now at least — the building sector is holding its resolve. With rising costs and another round of energy price increases looming, there may be clouds on the horizon but with geopolitical circumstances changeable, there is little way of knowing exactly what Q2 will bring.”
The months ahead will undoubtedly be challenging with merchants squeezed in all directions and forced to plan against a backdrop of such instability and uncertainty. Yet the underlying resilience of the sector is of crucial importance — demand continues and opportunities are still there to be grasped, however hard they will have to be fought for.
