The BWF’s Joinery State of Trade Survey Q1 2016 indicated that although sales performances remained healthy on the whole, plenty of risks remain. Despite plenty of woodworking businesses showing an enthusiasm to invest and increase their workforce, an increase in the cost impact of raw material and labour could eat into margins.
BWF Chief Executive Iain McIlwee commented on the state of the joinery industry
“Although we know that the first quarter of this year had been testing for some joinery businesses, a balance of 43% of joinery companies surveyed reported an increase in sales volumes from Q4 2015 to Q1 2016. Manufacturers were also mostly confident that sales volumes would improve in the next quarter, with 68% predicting an increase over the next year.
“Decent sales volumes and encouraging levels of investment have helped the industry stay lean and efficient despite some cost increases. What matters now is to be prepared for the risks that the new economic reality presents. Thin margins, poor payment, project slippage and contractual risks – particularly the harsh retention clauses that are often unfairly imposed by larger contractors – can bite fast. So it's essential that risk is costed in and contracts managed to ensure that a viable business doesn’t run dry of cash.
“One of the big risks to the joinery industry is actually in the news a lot at the moment – it's the same issue facing the steel industry. Import penetration remains a major risk to the trade gap and this puts UK jobs and investment under threat. We saw 12% growth in imports of timber doors from outside of the EU – Jan-Nov 2015 compared to the same period the year before – and 16% growth in imports of wood windows in 2014.”
Key points from the BWF Joinery State of Trade Survey Q1 2016 include:
– A balance of 43% of joinery companies reported an increase in sales volumes for Q1 2016 from the previous quarter. This follows on from 28% of joinery companies reporting an increase in sales volumes in Q4 2015 from Q3. Sales volumes results showed a balance of 39% of respondents reporting an increase over the past year.
– Manufacturers were confident that sales volumes would improve in the next quarter, with a balance of 61% predicting an increase for Q2 2016, and a balance of 68% predicting an increase over the next year.
– Capacity utilisation remains steady with 75% of companies running at over 70% capacity for the last quarter, and the same percentage expecting to use over 70% capacity for the next quarter and the next year.
– 26% of companies reported a current order book of future work extending beyond 3 months – up 3% from the previous quarter – with 39% now saying that their order book extended from between 1 and 3 months.
– Demand was listed as the most likely constraint on output over the next year by 38% of respondents. Labour availability and capacity came next, with 26% and 21% of respondents feeling that they were most likely to constrain output.
– Almost half (45%) of respondents on balance reported increasing their labour force in the last year, with 55% of respondents anticipating increased labour force over the next year. A balance of 82% of respondents had encountered higher labour costs over the previous year and the same percentage on balance expected an increase in the coming year.
– Wages/salaries increases were noted as an inflationary factor for unit costs for 78% of respondents on balance, with raw material costs (74%) the next inflationary factor listed.
– Respondents thought energy costs had been a factor in increasing as opposed to decreasing unit costs. 14% on balance indicated an increased impact through energy costs although 41% of respondents on balance reported a deflationary impact in unit costs through lower fuel costs.
– Investment in product improvement had been increased by 59% of companies on balance over the past year, with a balance of 64% to boost investment over the next year.
– Investment in manufacturing equipment spending had been increased by 59% of companies on balance over the past year, with a balance of 64% to boost investment over the next year.
The CPA’s latest Construction Trade Survey, also indicated that activity increased across the supply chain in Q1. This was the twelfth consecutive rise reported by construction product manufacturers representing the beginning of the supply chain, through to main contractors, specialist contractors, SME builders and civil engineers carrying out work on the ground.
Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said, “After a slowdown at the end of last year, firms throughout the construction industry experienced a stronger opening quarter in 2016. In spite of this, the clear theme for Q2 is uncertainty, with main contractors reporting lower orders in all sectors as projects are paused or postponed ahead of the EU referendum in June.
“Beyond that, firms continued to indicate that a shortage of skilled workers is the largest threat to construction activity over the rest of the year. Main contractors reported difficulties in recruiting bricklayers, carpenters and plasterers in Q1, whilst low availability of labour was also reflected in upward pressure on wage bills among product manufacturers and civil engineers.”
Key survey findings included:
– 19% of main building contractors, on balance, reported that construction output rose in the first quarter of 2016 compared with a year ago
– A balance of 38% of specialist contractors reported a rise in output during Q1
– On balance, 13% of SME contractors reported increased workloads in Q1 compared to three months earlier
– A balance of 13% of main contractors reported a decrease in orders in private housing and 42% reported a decrease in public new housing orders
– 25% of SMEs and 21% of specialist contractors reported an increase in enquiries in Q1, on balance
– 13% of civil engineering firms reported an increase in new orders in Q1, on balance
– 50% of main contractors reported difficulties recruiting carpenters, 40% for bricklayers and 36% for plasterers in Q1
– Overall costs increased for 74% of civil engineers contractors, whilst 42% of main contractors reported labour costs rose in Q1 compared with the previous quarter
– 100% of heavy side product manufacturers reported that wages and salaries increased from a year earlier
BWF members can log in and view the Joinery State of Trade Survey report and the latest industry information and forecasts here: www.bwf.org.uk/publications/market-research
In the face of major political, economic and technical changes coming the way of the woodworking and joinery manufacturing industry, the BWF is making ‘risk’ the key theme of this year’s BWF Members’ Day which takes place on 7th July. This year’s event will focus on how to understand the risks coming our way, how to prepare for them, and how to manage them. It will provide joinery manufacturers and woodworking professionals with a unique opportunity to participate in various workshops entirely focused on their needs, and to get up to date with the latest developments in the industry, with a free exhibition showcasing the latest innovations and technologies to aid the joinery industry.
