Summary
• The number of fencing tenders offered has declined.
• The fall-off in demand has been particularly marked in the domestic fencing sector.
• Prices of some products have fallen by 20% this year.
• Orders from the Highway Agency are said to be steady and there has been no adverse impact on round fencing.
• Demand for pallets has slowed and stocks are building.
• There is growing demand for FSC– or PEFC-certified pallet timber.

For the UK fencing industry, the contrast to trading conditions in the first half of 2007 could hardly be starker. Whereas just over a year ago the trade was experiencing runaway demand and widespread raw materials supply issues, customers are now proving as elusive as positive news about the economy.

The vast majority of the UK’s fencing companies appear to be feeling the strain of reduced consumption, whereas one or two of the larger operators are claiming to remain fairly busy at present, possibly because a significant proportion of their current workload is based on contracts agreed many months ago when the economic climate was less inclement. “There is no work to be had out there with normal margins involved,” TTJ was told this week. “Tenders have virtually dried up and, also, a lot of the work that has been tendered for and awarded has now been shelved because the clients’ own business is showing signs of slowing down.”

The fall-off in demand has been particularly steep in the domestic fencing sector. Prices of feather-edge boards and fencing posts are understood to have dropped around 20% between the first and second quarters of this year – a decline that has continued into the third quarter, according to most contacts. “Prices have tracked way down to try to find a market but there is very little consumption,” TTJ was told. These falling prices within the UK, as well as significantly higher costs of transportation, have led to a slowdown in imports of fencing timber.

Housing market

There are mixed views regarding the impact of the stagnant housing market on fencing sales: some experts believe this could ultimately prompt householders to invest more in their existing properties, whereas others suggest that, since many homeowners undertake fencing work in order to prepare their properties for sale, the downturn holds no good news. Another contact said: “Some people are not going on holidays and so are spending more of their time – and their money – on their properties.”

For the moment, however, the domestic fencing market has shifted into a significantly lower gear. Little more than a year ago, fencing companies were actively seeking labour-only sub-contractors who could help them satisfy rampant demand for their services; today, the sub-contractors are the ones making the phone calls in their search for work.

In the intervening period, rising costs have remained a prominent feature of the market with petrol, energy and steel fixings proving to be particular sources of concern. “No steel supplier will give a company a price at the point of sale – only at the point of delivery,” TTJ was told.

According to a leading UK supplier of fencing and other garden-related products for retail, demand developments have been sector and product specific. Sales to garden centres and builders merchants have failed to meet expectations, whereas turnover with the major DIY chains is on budget. And while fencing sales are lower, garden buildings are hitting budget while income from, for example, decking, landscaping products and arbours has actually increased. A senior company spokesperson commented: “People are still prepared to spend more to get quality.”

He also noted that demand had been particularly weather-dependent. “When the sun has been out, we have had sales,” he said, “but, in general, the weather has not been good at the right times to give us a lift.”

Suppliers’ cost rises

He confirmed that, at present, his company was coming under no major pressure to reduce its prices because customers were well aware of the strong upward momentum in their suppliers’ costs – most notably, steel, energy and fuel for distribution. Indeed, his company was “close” to implementing price increases, although these were likely to be small in scale in recognition of the fact that its customer base was also feeling the negative effects of ever-higher costs and more uncertain consumer demand.

Some areas of public sector demand for Fencing Products have proved more robust than domestic consumption: for example, orders from the Highways Agency are said to have been relatively steady – “but they are really turning the screws on compliance with, for instance, Sector Scheme 4 for timber preservation”, according to a leading supplier. “Fencing prices have dropped but in nowhere near the same proportion as for the domestic market.”

Meanwhile, demand for round fencing appears to have avoided any adverse impact from the economic downturn because supply is continuing to run well behind demand, thus leading to firm prices.