BWF
Timber Window Accreditation Scheme Bi-Annual Trends Report
‘The
US economy has been cooling over the summer months.’ says Mike Rigby,
whose company Michael Rigby Associates produced this report. ‘The
stock of unsold houses has been growing due to lack of demand. Building
is being cut back to its lowest level since 2003. New house prices fell
1.7% in August compared with August 2005 and prices of existing homes
dropped for the first time in 11 years. Consumers have been borrowing
and spending heavily and driving growth in the US. They will be a determining
factor in whether the slowdown in the economy crashes into a recession
or lands softly. A recession in the US would damage economies across the
globe. Even a pronounced slowdown would turn down the wick in China, Latin
America and Europe.
‘In the UK, householders are feeling the pressure of rising utility
and council tax bills. Debt and interest rates are rising. August's quarter
percent rise could cause strain if consumers are already stretched to
their limit and DIY and larger home improvements would suffer.
‘Established timber window manufacturers are used to the steady demand
that social and new build housing creates. But companies selling to the
retail sector are experiencing strong growth where timber is clearly enjoying
a revival. Provided supply problems are overcome, 2007 should be a good
year for timber.’
Sales
A net* of 41% of timber window manufacturers increased sales in the last
six months (March - August 2006) compared with the previous six months
(September 2005 - February 2006). Sixty-four percent of those reporting
a rise saw growth of 10% or more. Mid-sized firms (net 60%) did best but
large (40%) and small companies (33%) also did well. Manufacturers in
the South (net 53%) improved sales along with 44% in the North and 20%
in the Midlands.
*
The difference between the percentage of companies reporting an increase
over those reporting a decrease is the net balance.
A balance of 28% of manufacturers also reported better sales in the last
six months compared with the same six months of 2005 (chart 1). Sixty-six
percent of those who sold more increased by 10% or more. Again, mid-sized
firms (net 60%) did better than large (33%) or small manufacturers (13%).
By region, companies in the South (47%) sold more than those in the North
(26%) or Midlands (4%).
Forecasts
Forecasts for the next six months are good. A net 30% of manufacturers
expect to sell more timber windows in the next six months (September 2006
- February 2007) compared with the previous six months (March - August
2006) - see chart 2. Mid-sized firms (net 56%) are most confident with
none of those interviewed anticipating a drop. Manufacturers in the South
(42%) are more certain of increased sales than firms in the Midlands or
North (23%).
Year-on-year
expectations are also positive with a balance of 34% of manufacturers
forecasting better sales in September 2006 - February 2007 compared with
the same six months of last year (chart 2). Mid-sized firms (net 48%)
are again most positive but large (40%) and small manufacturers (27%)
are also bullish. Manufacturers across the country are optimistic.
Profits
A net 45% of manufacturers expect profits to increase over the next six
months compared with the previous six months. Mid-sized firms (56%) showed
most confidence but small and large companies (41%) are also upbeat. By
region, manufacturers in the South (53%) are more positive than those
in the Midlands (44%) or North (39%).
Order
Volumes
A net 40% of manufacturers reported fuller order books compared with six
months ago. Mid-sized firms (68%) and those in the South (53%) did better
than any other company size or region.
Employment
On balance, 26% of firms took on more staff compared with six months ago.
Manufacturers of all sizes and in all regions increased their workforce,
particularly large companies (net 53%) and firms in the South (42%).
‘PVC-U windows are becoming less popular and as a result the demand
for timber has grown significantly. Consumers have increasingly become
more interested in the aesthetic look of their homes and in ensuring they
get the most out of the improvements they make. Timber windows have therefore
become an attractive option to consider.
‘Energy ratings have also affected sales figures. U-Values are increasingly
more important as people see the benefits not only to the environment,
but to their household heating bills as well. These factors will therefore
influence customers in the choices they make when purchasing new windows.’
Mr Andy Ward, Director
A Woodcock & Sons Ltd, Leicester
Buying Prices
A balance of 79% of manufacturers reported higher purchase costs over
the last six months. The picture is similar across the board with few
firms reporting a fall.
Prices
To counter rising costs, a net 62% of companies put up prices compared
with six months ago. More mid-sized firms (net 72%) raised prices than
small or large manufacturers (59%). Prices increased across the country
especially in the Midlands (84%) with none of those interviewed in this
region reporting a drop.
Prospects
Manufacturers are confident with a net 68% more optimistic now about the
overall prospects for the timber window market than six months ago. Mid-sized
(76%) and small firms (72%) are more positive than large companies (40%).
Manufacturers across the country are confident.
Investment intentions
On balance, just under a fifth of manufacturers expect to invest more
on plant and machinery over the next 12 months compared with the previous
12 months. More mid-sized firms (net 28%) and companies in the South (31%)
are looking to invest than others.
Window types and styles
Looking at styles, 58% are casement, 35% are vertical sliding sash, 4%
reversible-pivot and 3% are tilt-turn (chart 4).
Manufacturers saw ninety-six percent of hardwood windows and 81% of softwood
windows now come from a certified or approved sustainable source.
Problems
Supplier price rises (65%), lack of skilled staff (55%), and changes in
legislation (52%) were the main problems facing manufacturers over the
last six months. However, changes in legislation was the single biggest
problem, mentioned by 23% of those interviewed.
Comment
‘I found many people were nervous about prospects for 2006 at the
start of the year: rising interest rates, tightening construction markets,
customers refusing to commit, meant they weren't sure the work would be
there.’ said BWF Chief Executive Richard Lambert. ‘But the previous
survey ran counter to that trend, and this one reinforces the strength
of the timber window market. The change is felt elsewhere. Time after
time, BWF members now tell me they're pushing themselves to keep up with
demand.
‘But it's not been plain sailing. Increases in raw material prices,
and especially fuel costs, have put pressure on prices and profit margins.
It's a sign of the confidence of the manufacturers that they are prepared
to increase selling prices, and are anticipating increased profits, and
especially further capital investment. No one makes that kind of decision
without being sure that they will get the return.
‘The survey found the overwhelming majority of windows were manufactured
using timber from an approved or sustainable source. But how many manufacturers
have chain of custody certification through their own processes to keep
the chain unbroken? Pressure for full chain of custody is going to increase,
particularly if the Government introduces the Code for Sustainable Homes.
The timber industry rightly talks up its environmental and sustainability
credentials, but it needs to take advantage of things like chain of custody
and window energy ratings if it is to capitalise on them.’
The Timber Windows Report, a bi-annual survey, is sponsored by The British
Woodworking Federation's TWA Scheme in conjunction with Timber Trades
Journal and produced by Michael Rigby Associates. The aim is to keep a
finger on the timber windows' market pulse, and to view manufacturers'
expectations of market movements.
Michael Rigby Associates specialises in fact based marketing in home improvements,
DIY and building materials markets.
The survey covers a representative sample of 100 timber manufacturers.
Telephone interviews took place 5th -14th September 2006.
© Copyright BWF and Michael Rigby Associates 2006. For survey details
or a copy of the full report call Jenny Reilly on 01453 521 621 or visit
http://www.521621.com.