Stuart Mason-Elliott outside the family firm.
Mind your step!
Published: 07 July, 2010
Since Builders' Merchants News published the last edition of Leading Lights in 2009, the market has been through a roller-coaster recession. Here is a snapshot of the aftermath.
A chill wind has been blowing through the construction industry for some time now. In our Leading Lights report last year, we identified some unusually challenging market conditions. Even in the latter half of 2008, merchants were reporting almost no real revenue growth.
Since winter 2009, market analysts have been hedging their bets and predicting 50:50 housing recovery, housing gloom.
It is hard to believe any report in the present climate and, as one chief executive stated bluntly: “anyone who attempts a long-range forecast is an idiot”.
The much-sought return to growth originally hoped for at the end of last year may not materialise in 2010. The lingering effects of market uncertainties, a change of government and its policies is keeping everyone alert to even the smallest changes.
The large nationals have been the biggest shedders of staff since the downturn. They are also the companies that have been more exposed to the drop in housebuilding than the nimble, smaller independents.
Most merchants by now have got a grasp on their particular situation.
Having weathered the worst buffeting of the recession and the long, bleak winter, they are now driving their businesses out of the recession and working to gain back lost market share.
Getting a business out of a recession successfully, it has been said, is much harder than steering it through a recession.
To help stimulate the market and generate the much sought-after recovery, the Get Britain Building campaign, launched in February 2009 has continued to gather momentum, even though its calls for a cut in VAT on RMI work have so far fallen on deaf ears in government.
Certainly, a cut in VAT would throw a lifeline to the industry and would give the market a boost.
Get Britain Building is also engaging with government to develop and implement a coherent strategy to deal with the UK’s existing housing stock, to create more homes and make the UK’s existing stock more energy-efficient.
Merchants of all sizes have responded to the downturn with a range of cost-cutting exercises, freezing their capital expenditure, blocking spending plans and cutting jobs.
Many saw bank agreements withdrawn at a moment’s notice, for scant reasons. There have been some casualties, but not as many as the doom-mongers originally predicted.
Training budgets, predictably, were axed.
Not surprisingly, after being put through the mill, many merchants were less than happy to discuss their businesses openly or were more guarded in how they presented their companies.
One thing is certain: merchants have to make margins now, or else more will not be around when the business does come back.
There is a growing optimism among housebuilders. This is being fuelled by industry sales, the stabilisation in the first quarter of 2010 and greater demand as the mortgage market eases and lending increases.
Government schemes such as the £500m ‘Kickstart’ programmes have in part supported the industry and are expected to generate an additional 5000 new social homes by the end of 2012.
Fundamental changes in the social housebuilding market throughout 2010 could see a return to more traditional two-storey dwellings. This will enable housebuilders to maintain tighter control of costs and decrease build times.
Throughout 2010 environmental product sales will continue to represent one of the main avenues for revenue.
For a breakdown of specific merchants performances, read on.