Economic activity has been slowing in the UK in recent months, undermining confidence in the timber importing and manufacturing sectors. The Economist Intelligence Unit forecasts that real GDP growth will slow from 3.1% in 2007 to 1.9% in 2008. New house starts are falling, while concerns are also mounting over the international ‘credit crunch’, jitters in the stock market and rising costs, particularly for energy. The government’s weak fiscal position suggests that there is now less scope for public sector spending on further improvements in public services.
The UK joinery sector reports adequate workloads at present, but there are significant concerns about the prospects for the rest of year as economic indicators have taken a turn for the worse. Joinery companies recently interviewed by the Timber Trade Journal suggest that their labor, energy and material costs had risen by between 7% and 10% last year. This has had an impact on profitability in the sector with the British Woodworking Federation reporting that it lost 2% of its core membership last year as several companies fell victim to bad debts.
But it is not all doom and gloom. Joinery companies operating at the higher end of the UK market report a reasonable flow of orders, particularly from the top end commercial and retail sectors. One mass producer also reported a pick-up in demand for timber windows and stairs at the end of last year, although the demand for doors remained flat. This company is now pushing up prices for its windows and doors by around 5% to absorb rising costs.
UK agents report mixed views on the current level of hardwood purchasing in the UK. While some note that the current economic situation has dampened purchasing by importers and distributors at the beginning of the year, others report a good level of demand in the opening weeks of 2007. One leading hardwood agent said they had been very busy in the last 3 weeks with strong sales in all the leading species, including white oak, sapele, framire, meranti, ash and walnut. This agent speculated that his good order book may be short-term due to importers’ restocking after curtailing purchases at the end of last year and may not be indicative of how the market will progress in the coming weeks. Certainly, the UK softwood market is quiet at present, indicative of slow construction activity, a factor which is likely to filter through into weaker hardwood demand in coming months.