Encon Insulation comment: Q3 2018

Mike Beard, Merchant Development Director Encon Insulation is BMBI’s Expert for Insulation Products – Distribution.

Despite persistent current political and economic uncertainty, the market continues to perform well especially in the builders’ merchant, housing and RMI sectors. New build, which underpins RMI which is the lifeblood of builders’ merchants, was given a confidence boost by recent government policy announcements on the building of new housing.

The Government’s target of building 300,000 homes a year appears a stretch to the industry which is preoccupied with growing shortages of skills, some materials and capacity. Yet, seen in historical perspective, the target is a mile away from the highest number of new homes ever recorded, 425,830 in 1968! In both the private and social space, housing initiatives seem to be gaining momentum, providing the sector with a significant boost as well as significant challenges, mainly in relation to skilled tradesmen.

Turning to the insulation sector, material shortages continue to affect many suppliers. We do not anticipate improvements to this situation anytime soon.

The construction industry faces several risks. Indeed, in some areas, construction itself is deemed to be a growing risk, with reduced lending from banks to construction following the high-profile failure of Carillion. In the period from March to August, lending to construction companies fell from £34.5bn to £32.6bn. We also face the potential of a changing ‘who owns who’ landscape as the influence of venture capital grows in the construction and merchant markets.

The potential fall in house prices, one of the many forecast scenarios suggested in a post-Brexit world, is another risk. A fall could destabilise what is and should be a buoyant strong UK housing sector for years to come, and one that’s vital for builders’ merchants.

Whilst writing this the Brexit issue is blowing up and the waters are becoming muddier and muddier, however the underlying domestic driver for more housing remains in place.
We hope we aren’t now proved wrong, and continue to have a strong, confident market, where new build stimulates RMI as home movers spend cash on their new home as they move up the property ladder.

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Launched in 2015, the award winning monthly Builders Merchant Building Index (BMBI) report is the only reliable measure of repair, maintenance & improvement (RMI) activity in the UK. Filling an important gap, it can be widely used in construction, and by economists, Government, national media, commentators and influencers outside the industry.