The UK timber frame market has witnessed a "very marked" increase in overall confidence since Easter, buoyed in particular by an improvement in demand from the housing and schools sectors. Competition for business continues to be strong and margins remain tight, but there appears to be a genuine, widespread belief that conditions could become even more positive in the second half of the year and beyond.
One of the UK’s leading timber frame providers said that "we are optimistic for a stronger year than 2012 and all current indications are supporting that forecast". It was basing its assertion on healthy growth in the private housing and student accommodation markets, as well as on signs of improvement in the hospitality and tourism sectors, "with major hotel chains turning towards timber frame to deliver superior energy efficiency quickly and on budget". Indeed, quick build times, relatively low costs and energy efficiency were identified as the key reasons why clients had chosen timber frame for their projects. The company expected growth to continue in all of these business sectors in the second half of 2013.
Several contacts said that the quality of tenders had improved since the second quarter of this year and that clients appeared more eager to proceed with projects. And a prominent industry figure highlighted anecdotal evidence that "one supplier’s income from the timber frame sector has gone up 25%" while other companies were known to be taking on additional sales people.
The "pent-up" demand for housing, combined with the government’s Help to Buy scheme, appears to have provided a stimulus. Announced in the Budget, the scheme enables buyers of newbuild homes to secure a mortgage with a deposit as low as 5%. In addition, the government is to guarantee a portion of lender losses from repossessions on 95% mortgages across the UK housing market from January next year – a move which it expects to generate around 190,000 sales per year.
Public sector housing
In the public sector housing market, meanwhile, one contact pointed to signs that "funding streams are starting to firm up and developments that have been stalled are now starting to move forward".
Despite the more optimistic market outlook, particularly for private housing, the UK’s timber frame sector remains "reluctant to be too upbeat", TTJ was told this week. One contact argued that margins are "no better" than at the start of the year amid "very, very competitive" conditions, although he expects this situation to improve as early as this autumn. At the same time, he added, there remains little scope for passing on cost increases to clients. Another contact was confident that order books would be thicker in 2013 than in 2012 but added: "We’ve had to remain competitive". On the upside, he said, average prices had been rising and the customer base had been more accepting of such increases than they were at the start of this year.
Another contact was even more tempered in his enthusiasm. "In terms of price cutting, it is still ferocious out there and most companies are still fighting for survival rather than planning a course to create real value in their businesses." He expected overall performance in 2013 to mirror that of 2012 but thought that 2014 would bring "strong growth driven by the private and public sector housing markets".
Rising costs also remain a concern for the timber frame sector. One contact said that his firm’s timber costs had increased by around 15% in the second quarter and that such hikes "cannot immediately be passed on and margins are squeezed as a result". He added: "There remains upward pressure on both timber and sheet materials."
Another industry figure predicted an increase in site labour costs, highlighting this as an area in which skills shortages could become apparent in the near future if demand for timber frame continued to improve. There was agreement from another prominent quarter that, in general, skills shortages remained a potentially serious issue and that some "pinchpoints" could be expected to emerge.
National brick shortage
Meanwhile, "a national brick shortage" was offering "a good opportunity for the timber frame market", TTJ was told. The upturn in the construction industry over the past few months and the associated increase in demand for supplies had pushed out lead times on bricks and blocks to the extent of "stalling activity and holding up projects". One contact added: "Double ordering is rife, further exacerbating the issue."
The timber frame option already offered developers the scope to design, manufacture and erect on site in a matter of weeks and so availability problems with traditional brick and block materials would only enhance its attractiveness, contacts said.
"Increased speed of build is important as developers and contractors alike increase activity and seek to realise a return on investment as quickly as possible," said one.
The government’s heightened focus on sustainable building and energy efficiency – as evidenced by the stricter targets introduced to Part L of the Building Regulations – was also serving "to further raise the profile of timber frame because of its inherent low-carbon qualities". Changes to Part L marked further progress towards zero carbon "and construction firms are looking for the means to deliver on revised governmental targets while keeping costs down", a leading timber frame manufacturer said.
Against this backdrop, disappointment has been expressed at the prospect of a six-month delay to the Building Regulation Part L 2013 changes that had been scheduled to come into force in October this year. The measures entail a 6% cut in carbon emissions for newbuild homes and a 9% reduction for non-domestic buildings. Andrew Carpenter, chief executive of the UK Timber Frame Association (UKTFA), believes that moving the date to April next year will potentially have an adverse effect on current R&D.
"From the timber frame point of view, we want to see the Part L regulations get tighter and tighter," he said. "What we need to hear from government is that it remains committed to sustainable construction."
In terms of the scope for expanding the take-up of timber frame, a major study has been conducted into why this form of construction accounts for around 75% of the industry in Scotland compared to only 17% in the rest of the UK. Researchers have focused on the business benefits behind its success north of the border with a view to "cascading" that information to other parts of the UK. According to the UKTFA, the report was likely to be published in the autumn.
The UKTFA also confirmed that it had recently disbanded its fire committee and that the handling of fire-related matters would revert to the organisation’s technical committee. This move was described by the association as a tangible sign of the positive reception accorded by stakeholders and industry alike to its documents covering fire safety during construction. While acknowledging the "excellent" work done by the UKTFA in this area, one contact argued that "the on-cost of fire management is placing a burden on the sector and there’s no question that the industry has lost market share as a result".
An even more eye-catching change lies just around the corner for the association: at Timber Expo in September, the UKTFA will officially become the Structural Timber Association.
According to Andrew Carpenter, this expansion of remit reflected the fact that "many of our members no longer just do timber frame" and that other options had grown in prominence. Clients wanted to speak to a single organisation when it came to all of these options and so news of the STA launch had been greeted very warmly. "We expect to be able to announce some major new manufacturer members joining us," he added.
