Most UK timber frame companies are enjoying the most promising market conditions since before the onset of the global economic downturn in 2008, with some already predicting this year will bring double-digit percentage increases in business volumes and value. Confidence has grown to such an extent over recent months that some manufacturers are already progressing plans to expand their production capacities.
With no pun intended, one contact said that companies "are now in a very different frame of mind", adding that "they are now thinking forward for the first time in five or six years – and that is very encouraging".
Timber frame order levels have continued the growth that took root in the second half of last year. For instance, Stewart Milne Timber Systems recently reported a 50% leap in recorded quotation levels and underlined the prospects of more new business to come. And a spokesperson for another timber frame business confirmed to TTJ this week: "Enquiry levels have been on the increase – and the quality of them too – to the extent we are quoting on 45% more jobs now than at this time last year." These are just some examples: the vast majority of other contacts agreed that there had been a healthy start to 2014, with several pointing to the generally mild weather as a contributory factor.
This widespread surge in activity has been aided predominantly by the upturn in private housing developments; latest estimates suggest 160,000 new houses will be built in 2014 compared to typically 110,000-120,000 in recent years. While one industry leader pointed out that this projection for 2014 "is still 100,000 short of where we need to be", the underlying positive, he added, was that the UK’s major political parties now regarded housing as a key priority.
With timber frame prospects improving too in both the school/education sector and in some commercial areas, overall volumes "are increasing rapidly", he said. "The question in the first half of last year was ‘Where is my next order coming from?’. Now it is ‘Where can I get enough men to install my gear?’"
The potential for even more acute labour and skills shortages reflects the fact that the picture for timber frame is not entirely positive. "Skills are a long way behind as nobody has invested over the last six years," said one producer.
Another negative is that the upturn in business is patchier in some regions than others. While most order books are full or filling nicely, notably in the south of England, Scotland in particular is not as busy and "hasn’t picked up to the same degree", TTJ was told.
Furthermore, the growth in orders from the social housing sector has not been as pronounced as for other sectors. "Housing association work is still sluggish and highly competitive, not only for timber frame but for contractors in general," said one contact.
But perhaps the most immediate and significant challenge for timber frame companies is that their margin growth is generally failing to keep pace with these increased work volumes. One contact said average project prices had risen since demand began to improve but conceded: "It’s not been a great increase. Margins are still too low almost without exception – and they are not improving. We are in danger of becoming busy fools."
The pressure on margins is coming from still intense competition for business at a time of rising raw material and labour costs. A leading timber frame figure warned of the potential for further business casualties in the sector based on the fact that some companies "bought projects at low levels during the downturn and now costs are rising, leaving them with nowhere to go".
Given such pressures, several timber frame companies – some of them sizeable – have decided "to not fight for volume and to let everyone else fight for the lower-value stuff", he said. In effect, these operators are "cherrypicking" those contracts that appear to promise the best returns and are therefore helping to protect or even grow their margins. Also on a more positive note, another contact insisted that margin growth "will come" given that "we are seeing material cost increases and these have to be passed on".
This latest market feedback tallies with a MTW Research report, which concluded that housebuilding and commercial construction were set to mount a quick recovery in 2014 but that profitability remained a key issue. By late 2013, it said, some 10% of the UK timber frame industry had a "low" or "at risk" credit rating.
The researchers also estimated that around £1.5bn worth of sales had been lost by the timber frame sector since 2008/09. But the study mitigated this with a forecast that non-domestic timber frame construction would record a 100% increase in the next few years.
Industry contacts said the brick and block shortage and new Part L could also help boost timber frame’s market share. The Part L 2013 changes scheduled to come into force in April this year include a 6% cut in carbon emissions for newbuild homes and a 9% reduction for non-domestic buildings. Structural Timber Association chief executive Andrew Carpenter said these changes "haven’t gone as far as we would have liked" but were "another step in the right direction". In terms of boosting the penetration of timber frame, he added, "they can do nothing but help".
STA continues factory tours
The Structural Timber Association (STA) will conduct a further 16 factory tours this year, building on the similar "very successful" programme run last year.
Aimed at introducing professionals in the UK housing community to the benefits of building in structural timber, each of the events attracted around 30 people ranging from housebuilders to architects and quantity surveyors. "With a hands-on element, they help give a structured evaluation of timber frame and what it can do," said STA chief executive Andrew Carpenter.
He said an increase in timber frame’s market share would be achieved only if customers were given good reasons to choose it over alternative building materials, and so the STA was looking to promote a "more sophisticated" approach based on initiatives designed to "grow skills". He highlighted the "bar-raising" work already conducted in the area of fire safety during construction.
The STA is about to publish a pocket guide detailing best practice in timber frame construction, to be aimed at erectors, contractors and site staff.
