It’s not all sunshine and roses in the joinery industry, but it’s not gloom and doom either, according to British Woodworking chief executive (BWF) Iain McIlwee.
The organisation’s recent state of trade survey, completed before confirmation of the UK’s double-dip recession, revealed that 41% of members experienced year-on-year sales growth in the fourth quarter of 2011 and 48% in this year’s first quarter. This was offset by about a third whose sales declined.
Another positive is that 63% plan to increase investment in product development over the next 12 months.
The Construction Products Association’s forecast of 5% growth in housebuilding this year was also encouraging, said Mr McIlwee.
However, there’s no escaping that it’s a tough market and joinery companies continue to struggle; costs are rising but housebuilders are squeezing manufacturers’ margins and little improvement in a bank lending is not helping.
"One of the reasons Oakworth Joinery didn’t succeed was that they had machines earmarked for replacement but they couldn’t raise the finance," said Mr McIlwee.
Lack of support
The BWF is also frustrated by the lack of support, and recognition, from the government and wrote a "hard-hitting" letter to the chancellor prior to this year’s Budget.
"The government tends to focus manufacturing support in areas such as aerospace and automotive because they’re seen as the high-end, cutting-edge industries and looks past what is the core of manufacturing, which is companies like our members," said Mr McIlwee. "Because they’re traditional they’re mistaken for not being innovative."
The sector’s capacity is not increasing and Mr McIlwee fears that when the economy does recover the industry will not be able to meet demand and the void could be filled by imports.
"The government really needs to consider that because we do create wealth; we make products and we create jobs. As a sector it’s valuable to the economy – £5bn turnover, 5,500 companies and 100,000 jobs."
There is some optimism in the industry – 57% of respondents to the BWF’s survey expect their sales to increase this year – but it is tempered by the increasingly complex problems in the eurozone and frustration over the government’s well-intended but ineffectual attempts to resuscitate housebuilding.
"It’s very difficult to understand the drivers," said one manufacturer. "The government doesn’t seem to know and none of the experts seems to know. There’s a lot of pent-up demand for houses and products but the question of mortgages and finance is holding it back."
Another believed that the intended panacea of the New Buy scheme had failed because the interest rates of 6-7% being charged by the banks, coupled with new affordability criteria, meant mortgages were still out of reach for many. "The government gave the concept to the money men and they’re going to screw it for all it’s worth," he said.
He expected newbuild housing to be fairly stagnant this year at around 100,000 starts, but there were "massive drivers", such as the euro crisis, which could "knock it off its perch."
Although the first quarter was quite positive for many joinery companies, house starts were down 15% on the first quarter of 2011 and 11-12% month on month and this would impact on joiners in the second and third quarters.
And this low annual housing output meant the supply chain was bearing the brunt of housebuilders’ cost cutting.
"Everyone who’s supplying builders needs to be extremely competitive. We have basically the same number of suppliers competing for half the level of business. It’s never going to be pretty," the manufacturer said.
Another joinery contact reported sales of windows and fire doors as "fairly consistent at a [low] level".
In the architectural joinery sector the position is equally difficult, with large contracts hard to come by.
"For the next month or so we’re busy, mainly because we’re pretty much doing jobs for nothing on pretty tight turnarounds so we can secure enough work to keep the current workforce employed," one joiner told TTJ.
"People are aware of how tight things are at the moment and they have the advantage where they can screw you down on price."
Covering costs
He had orders to carry him through "the next month or two" but the company lacked the one large job that would normally occupy them for a year. And while he wouldn’t take on jobs at a loss, he was barely covering overheads, despite having shed staff over the past two years.
"If I lose any more, we really will become a back street joiners’ shop," he said.
But while the economic environment remains uncertain, joinery companies are holding on to the certainty that things will get better and, when they do, the UK’s housing gaps will have to be filled.
"Eventually people will start building again in volumes, and it will grow and grow," said a large manufacturer. "If you survive you will be in an extremely strong position."
