UK: This year's Builders' Merchants News listing of the UK's top merchants puts accurate numbers on the severity of the building slump, showing turnover down, profits squeezed, and jobs cut by merchants, writes industry correspondent, Dean Stiles.
The results reported in the April edition of Builders' Merchants News reflect the impact the recession is having on merchant trading performance.
We are in an "unusually challenging economic environment" said Geoff Cooper, chief executive at Travis Perkins. The company, like most merchants, reported almost no revenue growth last year.
Mr Cooper believes the construction market has stabilised and will bottom around September this year. But, he admitted that 2009 was likely to be "very tough" for the construction sector warning there was "little prospect" of the market growing during 2009 and only limited prospects of a return to growth in 2010.
The Wolseley board believes that the downturn in the UK, Irish and Nordic economies - its main European markets - is likely to be generally more severe than that experienced in the remainder of continental Europe.
The large builders' merchants are far more exposed to the slump in housebuilding than most merchants, but the trend in falling sales has been universal in the industry, said Chris Pateman managing director of the Builders' Merchants Federation.
"Eleven thousand jobs have gone across the builders' merchants and materials distribution sector in the last 12 months. It's a lot of jobs and a measure of how serious the problem is," he said.
Michael Chadwick, executive chairman of Grafton, the British and Irish merchant reminds us that "while conditions in the financial and credit markets make the timing and nature of any recovery uncertain, both economies have been resilient to past economic shocks and will eventually recover from the current downturn."
The Get Britain Building campaign, launched in February and supported by the Builders' Merchants Federation, is calling for a range of measures to stimulate the industry including a cut in value added tax permissible under EU rules announced in March.
Government has no option but to reduce the VAT on building repair and maintenance work, Mr Pateman said.
"A cut in VAT would throw the sector a lifeline and could stimulate the market almost overnight," he added.
Margins in the merchant industry, which have remained steady at around 30% over the past two years - according to the Builders' Merchants Federation report on key performance indicators published in January - are under severe pressure, Mr Pateman said.
However, he does not expect the deep price-cutting that was a feature of the 1990 recession to occur.
Many merchants see 'green' markets as having the most potential.
PTS, part of the BSS Group opened its first dedicated Renewable Energy Branch in September last year and will "focus on the 'green energy' sector, improving service it provides and the range of products on offer," said Gavin Slark, chief executive, BSS Group.
He said that government-backed projects contributed well to company performance but "the non-availability of credit at consumer level has impacted on business, although with the majority of our business being in the repair and maintenance markets, we have proven to be quite resilient."
Carver has launched Timber Kit Solutions, a joint venture company designing and manufacturing timber frame panels and erecting on site.
"Timber frame housing is seen as a strong area for growth in the future," managing director, Henry Carver said. Kent Blaxill, too, is exploring new markets for eco products.
"We are just tying up a deal with company that specialises in fixing and supplying anything from groundsource heat pumps to solar roof panels. It is enabling us to market ourselves in a unique way with a number of products," Simon Blaxill said.
Wolseley UK will "focus on sustainability and offering customers the widest range of the latest sustainable products and renewable technologies available," said Rob Marchbank, chief executive, Europe and managing director Wolseley UK.
The top five merchants dominate the UK market with sales over £12bn. That is 40% of a building material market valued at £50bn.
Consolidation within the merchant sector continues, with the large groups absorbing long-established names. The most recent to change hands is Gibbs & Dandy, bought by Saint-Gobain Building Distribution, which already controls Graham and Jewson.
The April edition of Builders' Merchants News is out now.
