The UK’s woodworking sector put in another strong performance last year and this year is proving similarly positive.
According to the British Woodworking Federation’s (BWF) latest quarterly joinery state of trade survey, around 30% of its members saw their market increase by more than 5% in the last 12 months – and this proportion increased in the first quarter of 2017.
The BWF attributes this to the recovering new build market and to the fact that currency fluctuations have often hit importers harder than domestic manufacturers.
“Cautious optimism best describes our mood at the moment,” said Iain McIlwee, BWF chief executive. “Prospects for the second quarter are good, with over a third [of our members] anticipating growth of over 5% and just 12% expecting to step back. As we look into next year it becomes more difficult to predict, but things look pretty stable at the moment.”
This is borne out by one of the BWF’s long-established membership initiatives, the Wood Window Alliance (WWA). JELD-WEN’s senior product manager, Tony Pell, who is chairman of the WWA, confirmed that volumes have held up despite the fact that increasing competition from imports and alternative materials was making trading conditions tough.
By value, timber windows account for around 20% of the total windows market.
“The real positive is that timber windows really are what the consumer wants. Our recent research shows there is a growing desire to stem the tide of plastic in our lives,” said Mr Pell.
“That said, the PVCu industry remains aggressive; they have the backing of large multinational chemical companies and big marketing budgets, so they cannot be underestimated as a threat. We have seen new ranges designed to compete directly with timber options.”
Iain McIlwee agrees that the growing awareness of the environmental impact of plastic isn’t translating into window purchases as much as he would like.
“There is intensifying pressure on us as PVCu becomes less palatable in other markets,” he said. “New Heritage PVCu windows are a threat and we need to be awake to them and that the limitations of these products are as clear as the strengths of our own.”
However, the PVCu window industry’s efforts to mimic timber could be its Achilles’ heel, according to Roy Wakeman, chairman of the Performance Timber Group, which includes Mumford & Wood, Dale Joinery and Timberwindows.com.
“PVCu window manufacturers have improved their products and tried to emulate timber and have added a lot of cost,” he said.
“At the sharp end the price difference between a high quality PVCu window and good quality timber one is quite small. I think timber is quite competitive on price now.”
Mr Wakeman added that overall demand had been good, estimating that the sector had grown by about 10% over the last 12 months.
The majority of growth had been at the volume end, thanks to the bullish state of the housing market, he said.
The top end of the market has been “flattish” for some joinery manufacturers, who attribute this to the changes to Stamp Duty putting up the property costs and cooling the refurbishment market.
For others, the refurbishment of luxury properties in places such as London remains strong.
“Demand has improved significantly,” said Forrester Adam, managing director of Haldane UK, which specialises in continuous handrails, staircases, doors and woodturning. In London he puts this down to investment in property by foreign billionaires and, in the wider market, to low bank interest rates.
“People don’t really know how they are going to make their money grow, so they are investing in property refurbishment,” said Mr Adam. “It’s certainly a better option and a better return.”
Howarth Timber Windows and Doors general manager Alan Shearer also pointed to improved demand over the last 12 months but said that there had been downs as well as ups. Private housing growth had fallen short of previous forecasts at just 6.7%, for example.
“Quarter 1 [2016] transactions rose 20% compared to Q4 of 2015, followed by a 30% fall in the second quarter and an increase of 9% and 1.1% in the third and fourth quarters of 2016,” he said. “So the market was quite volatile, with large growth, a significant fall and then modest growth in the latter two quarters – all revolving around the changes in Stamp Duty.”
He added that he thought the 3% growth being forecast for next year is probably accurate but while the UK economy is relatively buoyant at the moment, the full impact of other factors, such as rising inflation, had yet to be seen.
Scotts of Thrapston also sounded a cautionary note and suggested that demand had actually reduced at the bespoke and high end of the joinery market, which is where it specialises.
“We attribute this to a number of factors, including the Brexit result and pre-Brexit delays in the start of construction projects and Stamp Duty increases for the multimillion pound properties, resulting in investors, developers and housebuilders all seeking more innovative ways to procure and finance housebuilding costs,” said David Scott, chairman.
“Overall costs have risen, including timber, thus delaying decision making,” he said, adding that, unlike Haldane, he believed that foreign investment into the UK had diminished.
“However, there is growth within the self-build market and along with a renewed government focus on this sector, this is having a positive and encouraging impact and making up some of the gap in demand.”
The full impact of the UK’s decision to leave the EU has yet to play out, of course, but in terms of tangible consequences to date, currency fluctuations and the knock-on effect on material and component prices stand out.
“Ninety per cent of our members reported increases in unit cost price over the past 12 months and none saw a reduction,” said the BWF’s Iain McIlwee. “Margins are tight and we need to see a fair risk to reward ratio across the construction supply chain if the sector is to thrive.
“This is an area where the supply chain needs to step up. In other material sectors there is far better alignment to support the manufacturer in selling on value – for timber, the fragmentation upstream means there is less support and this makes it more difficult for the SME timber manufacturers.”
The WWA added that the uncertainty the Brexit vote had created didn’t help investment but the upside was that the inflationary effect on materials had helped UK manufacturers extend their position in the market.
“Like most people I was flabbergasted at the result of the EU Referendum,” said PTG’s Roy Wakeman. “And I was equally staggered that the impact of that decision was positive.
There was a bit of hiatus at the time, which did impact for several months, but I think the overall effect it has had on the UK economy has been positive.
“We’ve had an issue with the currency and the impact on exchange rates, particularly when we are bringing products in from our factories in Latvia and Poland [on the Timberwindows.com business] and we’ve had to deal with that. We have hedging agreements with our supply chain and that has mitigated it to some extent but it doesn’t deal with the 20% erosion of the value, so in some cases we’ve had to put our prices up.”
Meanwhile, at Haldane, Forrester Adam is less troubled by the possibility of higher prices from Europe as the majority of the material his customers specify is North American.
“If Europe reacts negatively in driving up the cost of materials they provide us with, we have no choice but to pass this on to customers or suggest buying comparable timber from another source such as North America,” he said.
Mr McIlwee added that the BWF wasn’t spending a lot of time asking its members how they felt about Brexit.
“Our focus is on the proposals for the new Industrial Strategy – how we can support this productivity push and ensure that the woodworking sector isn’t overlooked. All too often government tends to think of wings and wheels when they think of manufacturing and this could be a fatal mistake when you consider that the construction products industry is bigger than these combined.”
The snap General Election was deemed “too snap” to have had a destabilising effect on day-to-day business, but it did stall lobbying activities.
“I have taken on the chair of the Confederation of Timber Industries, the function of which is to lobby government,” said Mr Wakeman. ”We had a big meeting set up at the end of April and there was no government – all the politicians had moved back to their constituencies.”
Market drivers
Cost is seen to be a significant market driver. “We believe that costs are very much influencing the market at the moment,” said David Scott. “The increase in costs and the diminished value of the pound have certainly negatively impacted the levels of demand within the bespoke joinery market.
“The pressures with respect to green credentials and legislation are very evident in certain sectors of the market – for example, education – and all joinery companies have had to ensure these factors are paramount in new design work.
“The renovation and self-build market is much more driven by aesthetics and design and this is where boundaries are constantly pushed.”
Alan Shearer agrees that cost is key. “I think the market drivers come down to simple economics. The government’s Help to Buy scheme is a huge driver for housebuilders, accounting for some 40% of sales for some of the volume builders.
“The effects of the scheme, together with lower employment and consistently low interest rates should all point towards a growing market. That said, there are still elements of uncertainty around matters like Brexit and inflation, which may be holding us back from truly significant growth.”
Sector Strengths
In terms of the different sectors within the overall joinery market, new build is engendering the most confidence.
“New build is the more important [sector] for 60% of our members and this is followed by all the commercial fit-out work we are involved in,” said Iain McIlwee.
“New build looks strong with a lot of political weight behind the concept of building new homes. The RMI market is always going to be a bit more erratic and confidence led so we expect this area to be a bit bumpier over the next couple of years as the Brexit story ebbs and flows. Commercial seems to be stable and, indeed, last year was another strong one, but I suspect that this sector will be impacted by Brexit uncertainty.”
Despite not grabbing the headlines in the same way as new build, RMI has proved a lucrative market, however.
“According to stats released by the Construction Products Association, private RMI grew by 13% last year, which I thought was pretty good,” said Mr Wakeman. “The commercial side has been a bit flat but we’re winning work in universities and one of the other areas we’ve had some strength with our high quality brands is into hotel developments. The leisure market is being invested in at quite a high rate at the moment and we’ve got some nice jobs.”
One such project is the replacement of more than 1,000 windows and doors as part of a £200m restoration project at Trump Turnberry Resort in Scotland by Mumford & Wood.
Haldane reports equal success in new build and refurbishment sector, noting that the market for continuous handrails within shopping centres had shrunk from its dizzying heights of a decade ago. It also noted an increase in growth from schools, universities and hotels.
Mr Adam also said that the proportion of its staircase business is increasing. The company “upskilled” during the recession and began “wow factor” bespoke staircase production and installation about five years ago.
“It’s about 25% of our overall business at the moment and with the level of enquiries we are receiving, I can only see that growing in the next few years,” he said.
Aluminium-clad windows are growing in popularity, according to the WWA, particularly in the health and education sectors where conversations are starting to focus around biophilia.
Modified wood is also “cutting a dash” and helping to underpin the life-cycle argument for timber, said the WWA, while Scotts of Thrapston also noted more demand for Accoya and for “the more stable hardwoods” such as sapele.
“We have also noticed that man-made/ manufactured veneers are becoming more sought after by customers in design intensive environments,” said Mr Scott. “One such example is Alpi Lignum, which is being specified more frequently.”
Howarth has seen a trend for different colour variations, with demand for greys and greens as well as white. “Last year we did 32 shades of grey,” said Mr Shearer. He also reported that demand for bi-folding doors is consistent but its top-selling products include its flush casement windows.
“They are becoming more popular as people change over from stormproof windows due to the improved aesthetics of flush casement windows,” he said.
He added that a refresh of the flush fit range is ongoing and that the company had delivered the first of its new concealed balance sliding sash windows to customers.
“Both have been well-received so far, with plenty of orders coming through,” said Mr Shearer.
Howarth’s Lifetime Homes-compliant sliding sash is in final testing and will be ready for sale this summer.
Joinery manufacturers are making some significant investments and continue to innovate which will stand them in good stead for the period ahead.
“The constant innovation in this sector always amazes me,” said the WWA’s Mr Pell. “Apart from the developments in locking/ latching and glazing options, we are seeing a growing range of coatings and materials available.
“Investment in machinery that helps to drive volume, and spraying lines that support consistency and colour flexibility in a lean manner are helping to drive up efficiency and quality.”
“Companies are taking the view that to continue they need to invest to ensure that efficiencies are driven into operating processes and scale needed to sustain the business,” added Mr McIlwee.
“Most seem to be targeted at capacity but inevitably there is a focus on delivering the best possible product at the lowest possible cost.”
Scotts of Thrapston has invested approximately £1.1m in joinery and timber engineering machinery, transport and staffing over the past 12-18 months. It is also considering the purchase of a new CNC router during 2017/2018 and is currently undertaking a major refurbishment of its offices leading up to its centenary in 2020.
“We’ve continued to invest in the factory at Mumford & Wood and now have a very integrated production line,” said Mr Wakeman. “We’re investing in more machinery later this year which will improve efficiency and ensure the quality of the product is maintained.”
Haldane has also been spending money, investing £500,000 in a 5-axis CNC machine.
“We originally bought it last year to increase the capacity we had with the two 5-axis and one 3-axis CNC machines we already had,” said Mr Adam. “It has been built specifically to work with our custom developed software and has increased our precision machining as well as enabled us to offer comprehensive dry jointing. We’re now making lots of products we would never have been able to without the new machine.”
One challenge joinery manufacturers share with many other sectors is the skills shortage – and it’s investing here, too.
“If skilled installers from the EU move out of the UK market we could see more issues in this area,” said Alan Shearer. “It is something we are conscious of and we’re actively trying to work with customers to resolve it.
“We have started an initiative where we send one of our own, highly skilled joiners out to site to teach third party fitters how to install timber windows correctly. It’s an area we’re happy to invest in as it is in everyone’s best interests to make sure our products are fitted properly.”
Iain McIlwee shares the sector’s concern about skills but said there are reasons to be positive.
“I was asked to address a Select Committee in Westminster last October and highlight some of the concerns we had. I am delighted to see that almost all we asked for has been given, even the UCAS-style system for technical qualifications has found its way into the industrial strategy.
“Other changes will see the L1-style diploma that gave woodworking a bad name, frustrated apprentices and didn’t provide the steady flow of people we need, give way to T-Level qualifications that we can develop.
“The important thing now is ensuring we are ready for the changes and to this end we now have our further education Centres of Excellence, we have completed work on the new joinery qualification and started work on a heritage qualification, plus the new Wood Products Manufacturing qualifications that will support higher volume suppliers and specialist companies.”
