Last month Iain McIlwee (BWF CEO) was asked to attend a small round table event focussed on the build-out rate for housing hosted by Sir Oliver Letwin MP.
- explain the significant gap between housing completions and the amount of land allocated or permissioned in areas of high housing demand, and make recommendations for closing it.
- identify the principal causes of the gap
- identify practical steps that could increase the speed of build out. These steps should support an increase in housing supply consistent with a stable housing market in the short term and so that over the long-term, house prices rise slower than earnings.
- provide an interim report to the Chancellor of the Exchequer and the Secretary of State for Housing, Communities and Local Government in time for Spring Statement 2018 and a full report for Budget 2018
“I thought it was an encouraging meeting, firstly it reinforced Government remain committed to building housing supply to 300,000 units per year. There was real consistency in the views of the supply chain too, in that any capacity issues are speed bumps rather than barriers. Product supply will never be a barrier to growth as long as the process is tidied to ensure consent and commitment are linked, procurement practices are improved, manufacturers are given confidence to invest, more is done to ensure that investing in quality won’t be undermined by value engineering without regard for the whole life cost of the project and that the public sector through particularly social and keyworker housing ensures there is a good base load on which to build investment.”
• Sir Oliver Letwin
• Brett Amphlett, BMF
• Joe Hudson, Ibstock
• Laura Cohen, British Ceramic Confederation
• Jade Lewis, Saint-Gobain
• Iain McIlwee, British Woodworking Federation • Jonathan Clemens, Tata Steel
• Keith Aldis, Brick Development Association
Existing factories are operating at ‘full tilt’ although there is room for 10-15% capacity growth by increasing shift patterns and increasing the number of production lines. This would take c. 6 months.
Current slack is picked up by imports, but European construction growth in the Netherlands and Belgium is putting pressure on this.
Roughly 60% of bricks produced each year are sold to housebuilders; 40% are sold to merchants. Of these, 50% are sold to construction firms engaged in commercial and residential development, including many smaller firms.
2.4bn bricks is the annual ‘sell out capacity’; there is capacity to produce 1.9bn clay bricks in the UK, with circa 400m imported last year, and around 100m sourced from existing stocks during the last 12 months.
It takes roughly three years to plan and build a new brick factory.
There are constraints on recruiting people for new factories.
The supply chain for bricks is highly inefficient and the industry needs to work collaboratively to solve this. Competition Law acts as a restrictor to productive collaborative working in this area. Orders are routinely placed and cancelled and this makes planning and forecasting very difficult. Up to 30% of total production is affected in this way.
• Government ‘pressing button’ through housing targets and investment in housebuilding, particularly counter-cyclical demand, including new social housing
• Access to nearby secure clay assets, which require 25 year licences
• Support to ‘level the playing field’ on energy costs vs. overseas competitors
Robust trade remedies framework after Brexit to counter dumping etc wherever issues arise from
One issue identified was that there are approx. 400 ‘very specific’ brick types out of approximately 2,500 product lines. The extent of variety is often due to requirements in planning permissions.
Persimmon are investing in a concrete brick factory, but using concrete bricks can increase build times and cost.
Builders’ merchants offer a brick matching service to help businesses obtain the right type of brick for their project.
• Plenty of extra capacity for clay drainage pipes (and almost no imports). Some extra capacity for clay roof tiles – imports have increased to c.25- 30% UK market
• Some extra capacity for wall / floor tiles – there is currently a significant level of imports. Anti-dumping tariffs renewed in recent EU review
• Some limited extra capacity for ceramic sanitaryware – there is currently a significant level of imports.
Steel is not used extensively in in residential due to the high proportion of low rise housebuilding which is predominantly brick and block construction. 80-90% of smaller components are manufactured in the UK. To expand use of steel, awareness of how to fix and use steel needs to be improved. Modular construction requires more steel than traditional build methods. Switching on additional capacity, given forecast demand, is relatively short.
Brexit could be an issue for timber imports, although more investment is going into UK forestry.
Brexit could affect imported materials. If no mutually beneficial UK-EU customs’ agreement is struck, British businesses face paying 20% extra upfront as VAT on imports like timber & bricks. This has immediate implications for operating costs and cashflow for importers, merchants & manufacturers.
Saint-Gobain UK worked with the Construction Products Association on a study of the factors underpinning investment in the construction products industry. The report makes recommendations on how policy can be designed to reduce uncertainty for business and encourage investment:
• Regulation should be simple with minimal administrative burden.
• Industry should be consulted early and regularly to ensure problems and solutions are mutually agreed and evaluated.
• Regulation should be long-term, with cross-party consensus to prevent changes owing to party politics. Unplanned changes must be avoided.