Summary
• Joiners are starting to feel the effects of government spending cuts.
• Architectural joineries have been hit particularly hard.
• The industry has generally welcomed the government’s moves to boost housing and help small businesses.
• Some joiners are said to be taking jobs at below cost.
• Stair manufacturers have adapted to lower demand.
It’s a mixed picture in the UK joinery market and, while many manufacturers are optimistic about prospects in 2012, uncertainty continues to hang over the sector in general.
In view of the economy, many were reasonably content with the level of business in 2011 and if that can be maintained this year they’ll be satisfied.
“We hope it won’t be any worse than 2011 but it won’t be any better – that’s a certainty. If we can get what we had in 2011 we can cope with that,” said one contact.
“We can’t complain about the activity that we’re seeing. It’s not as buoyant as it has been but, given the backdrop of the economy, the current order books are not too bad.”
While the private RMI market was still “ticking along nicely”, he said joiners were now starting to feel the sting of the government’s spending cuts.
“We’re starting to see some stress in those markets, such as schools and hospitals,” he said.
In 2011, another manufacturer was “busier than we’ve been for a long time” but his optimism for 2012 was tinged with caution. “If we keep on doing what we’re doing and if the market keeps on doing what it’s doing we’ll be alright,” he said. “There’s a lot of talk that the first quarter is going to be tough.”
His company had jobs around the country and “stacks of work” in London, especially social housing refurbishments, which would continue into the first quarter.
In the 2011 calendar year he expected sales to be up about 10% on 2010, and 12-13% higher for the financial year to the end of April. “Our bottom line is improving as well,” he said.
Diversification
He attributed his company’s success in riding the economic storm to having different routes to market and a geographical spread.
“The key to it is spreading your bets to different markets, different products and different areas of the country,” he said.
Rising costs and the sterling/euro exchange rate were added pressures but the company is passing the higher costs on to customers.
“We’ve hardened prices on a lot of products; it’s either take it or leave it,” he said. “You win the order on the terms and prices you want to win it. We don’t price too many things close to the bone if we can help it.”
However, according to several contacts that’s not the case for all manufacturers as some – in both the joinery product and architectural sectors – are pricing work below cost in order to win business.
“There are companies that you hear are inundated but it makes you wonder if they’re doing it for nothing and how long they’re likely to be around afterwards,” said an architectural joiner.
It is the same in the stairs market, which has been particularly badly affected by the downturn in newbuild housing.
“We’re seeing ridiculous deals being offered that don’t make sense,” said a contact in the stairs sector.
Over competitive
“One of the biggest issues is that it’s over competitive. Typically it’s been a volume market and with the volume eradicated people are chasing smaller volumes at much lower prices and virtually giving products away. It’s a double-edged sword: you have a lack of volume and reduced sales, and reduced value because the prices are so low.”
He worries that the cut-price approach will have a detrimental effect on the industry’s medium and long-term future.
New product ranges had sheltered his company to some extent, but order books were still affected.
“Order volumes were down probably 30% in 2011,” he said. “We’re disappointed to be down at all but in view of the market as a whole we shouldn’t be too disappointed. In reality we have considerable costs and overheads and it’s terribly difficult to make any money out of the situation.”
However, he was more optimistic about 2012. “We don’t expect any huge rises but we think we can achieve about 10-15% growth. We have some exciting things on the go so that gives us a higher degree of optimism. If we were stuck with our traditional range of products we’d be very concerned.”
The silly deals aside, he believed that generally stair manufacturers had adapted to the diminished market.
“A lot have felt the pain and they are in a position where they can cope with the lower level of demand,” he said.
Government plans
He was hopeful that the mortgage guarantee scheme the government announced in November would have a positive impact.
“The government measures will be very good as long as they happen sooner rather than later and they don’t drag their feet over them. The mortgage situation for many people is intolerable. If people can get mortgages and buy houses again it will make a huge difference.”
Another contact welcomed the government’s mortgage scheme but was less optimistic about the National Loan Guarantee Scheme aimed at helping companies with turnovers below £50m receive finance.
“I’m not sure that’s going to convince the banks to do anything other than hoard the cash,” he said. “It’s what people need but the banks don’t have any appetite for the construction sector and anything associated with it.
“The attitude of the banks to any of our businesses, no matter how big or small, is absolutely disgraceful.”
An architectural joiner believed the government’s attempts to kick-start the economy were “too little, too late”.
“The damage is done,” he said. “It’s taken a lot of years to get into this state and we’re not going to get out of it overnight.”
His business was suffering from the reduced government spending and he expected the new year to be worse than 2011.
“We’re hand to mouth at the moment,” he said. “We have no work in the pipeline that we can say we’re definitely going to get.”
He said he wouldn’t be surprised if the company considered further redundancies, which would follow the shedding of 50% of the workforce over the past two years.
Each year the company needed one big project of around £1m as a mainstay but it was unlikely to secure one this year. “And it takes an awful lot of little jobs to keep us busy,” said the contact.
The company was tendering for larger projects but against stiff competition.
“You can spend a lot of time and effort with architects in the early stages in the hope you get the job, and then it peters out. There’s a lot of competition,” he said.
Optimism
A British Woodworking Federation (BWF) spokesperson was optimistic that the organisation’s members could withstand another year of difficult trading.
“It’s a varied picture but those businesses that are good and well managed will cope,” he said. “Most of our members are small companies and they’re on their feet, working on the shop floor as well as running their business and they’re pretty adept at managing things.”
But he warned businesses to keep an eye on cash flow. “Managing cash is king,” he said. “You have to make sure you don’t let your bank down. You have to pay your loans and keep your interest bills down.”
