Most people would agree that 2019 was a memorable year, mostly for the wrong reasons, as Brexit kept dragging its feet. The thought at the beginning of 2020 was a new year and decade would see some positive shifts in the Builders’ Merchant industry and a period of growth was ahead.
I remember reading a news article at the beginning of January about the initial outbreak in Wuhan, when about 80 people contracted the Coronavirus. Four months later and we’re in an upside-down world that will never be the same when things return to normal.
For builders’ merchants this upside-down world became a reality towards the end of March as a nationwide lockdown was enforced. Sales come to a standstill overnight, with only essential deliveries done.
Overall, Q1 2020 was down by -6.7% in value, with all core categories affected. The shift becomes more evident comparing February to March figures for the two most recent years. In 2019, February to March saw an increase of 14.6%, but in 2020 a decrease of -1.9% took place.
Heavy Building Materials was down by -6.5% from Q1 2019, with Bricks, Blocks and Insulation seeing the largest declines. Timber & Joinery saw an even larger decline of -11.1%, with Timber and Sheet Materials most affected and Cladding the only area that saw growth from 2019.
Other noticeable market shifts include a -12.7% decline for Tools, and a -7.4% decline for Plumbing, Heating & Electrical. In the former, Power Tools is the driving factor behind the drop, while the latter has been negatively affected by both Plumbing and Electrical Equipment. The one interesting shift was a 24.2% growth in Workwear and Safetywear, which could be expected under current circumstances.
Projections for the remainder of 2020 are difficult to make, but we know there will be a significant drop in April sales. The next few months will be critical in determining how the industry adapts to the new “normal”. Online sales will continue to grow and start to play an even bigger role going forward. The journey to recovery has only just started, but the positive light in all of this is that the industry remains as resolute and determined as ever.
John Newcomb, CEO BMF, adds:
As Donald Rumsfeld once said, there are known knowns, known unknowns and unknown unknowns. The first quarter of 2020 has certainly led us into “unknown unknowns” territory. Daily life in the UK, along with almost every other country in the world, changed radically as governments first acknowledged the deadly threat of Covid-19 and then struggled to find the “right” way to keep citizens safe and reduce its impact.
Merchant sales figures revealed in this report are the first results within our sector to reflect the negative impact of the Covid-19 pandemic and Government measures to reduce transmission of the virus.
In the current circumstances no-one will be surprised by these figures. They reflect a period when confidence dropped as coronavirus spread across the world to the UK and many building sites and builders’ merchants shut down completely when the lockdown took effect on 24 March.
Due to the method of collection, we can be sure that the BMBI results are an accurate reflection of the period. Whereas the estimates published this month by the Office of National Statistics (ONS) came with a caveat that they are subject to more uncertainty than usual as a result of the challenges they faced in collecting data during the coronavirus pandemic.
Nonetheless the ONS figures make interesting reading. Total construction output fell by -2.6% during Q1 2020 over Q4 2019, and by -3% in Q1 2020 vs Q1 2019. A closer look reveals a poorer performance in RMI work, down -3.5% this quarter vs Q4 2019 and by-6.0% vs Q1 2019. Drilling down further, Private Housing RMI work – a mainstay of builders’ merchants’ sales – fell by 14.6% compared with Q1 2019, having dropped -18.6% in March 2020 vs March 2019 and by -8.6% vs February 2020. The decline in the first quarter reported by the ONS is the largest since data was first published in Q2 2012.
So where are we now? Sites are beginning a gradual return to work whilst maintaining enhanced safe working practices. Although this demonstrates the construction industry’s desire to assist in the recovery of the UK economy, with contractors reporting a slump in new orders and reports of projects being postponed, we remain in the land of “unknowns” and it is far too early to say how long that recovery will take.