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Builders’ merchants have enjoyed a bumper year of sales, in part thanks to DIY and large-scale home improvements ramping up during the pandemic.
The industry recorded its second-best quarter on record for Q3, according to the latest Builders Merchants Builders Index, with timber and joinery products being the most in-demand.
While the past year has brought welcome opportunities for suppliers, they’ve had their fair share of challenges to contend with, too.
Covid-19 and the aftermath of Brexit led to widespread supply chain disruption and price fluctuations – but will these challenges continue into 2022? And what else is on the horizon?
We polled builders’ merchants from around the UK to find out what they’re bracing themselves for in 2022, and where the opportunities lie.
With demand expected to remain high, materials and stock shortages are weighing heavily on the minds of many. Inflation and continued price fluctuations could put pressure on margins and make it difficult to fulfill customer orders.
Stefano Lebban, director of Herts Tool Company, warned that the availability of cement, copper and steel had not only pushed up the price of stock but caused delays in construction projects. Chris Lawson, managing director of CK Architectural, said that materials prices had gone up by almost a quarter in recent months, while labour costs jumped by 15%.
While some believe that prices have now reached their peak, fluctuations remain a problem, as Samuel Hunt, CEO and co-founder of Materials Market put it:
“While price increases are difficult for resellers and builders to manage, price fluctuations can pose just as many problems. Not knowing whether prices are going up (leading to under-pricing) or down (leading to over-pricing) make quoting materials and building projects a real headache.”
It isn’t just the cost of materials either. Fuel hikes are expected to hit firms that transport machinery to site for their customers, and even accessing machinery is proving difficult for some.
Compounding matters further is the cost of international shipping, particularly sea freight, with containers from Asia now 10 times more expensive. Cass Heaphy, digital director at Paving Direct, said:
“Whilst we expect these costs to come down slightly, the cost of imported goods from China and India will remain high – affecting all parts of wholesale and retail in the construction industry.”
Keeping up with demand
The scale of home improvement projects is nothing compared to the enormous infrastructure projects that could put pressure on fragile global supply chains.
Des Duddy, managing director of ProTrade, pointed to the $1.2trillion infrastructure bill passed in the US to rebuild the nation’s deteriorating roads and bridges and fund new climate resilience and broadband initiatives.
“It’s a substantial bill, one built to stimulate the economy,” he said.
“On the flip side, though, it has created a big demand for labour and raw material – a demand that, likely, cannot be met by the current supply issues. What this bill will also do is inflate the prices of raw materials even further than the 20% average we have experienced during 2021, as projects all over the world contest and haggle over products.
“Factories producing raw materials and products are turning their attention to this American bill because they know they can get money from the market, creating an attitude that no price is too high.”
Skilled labour is in short supply due to an ageing workforce now retiring, a lack of younger homegrown talent and reduction in EU nationals. Coupled with the rising cost of materials, wage inflation could reduce margins further and some fear that construction projects could be delayed or even shelved because of higher costs and/or longer lead times.
Stefano Lebban, of Herts Tool Company, said businesses would have to up their spending on both recruitment and salaries to secure the most in-demand skills.
Delays are not only down to staff shortages in the construction industry though. Chris Lawson, of CK Architectural, said local authority planning departments struggling to clear the backlog of applications, projects are not getting off the ground as quickly as before.
Then there are the well-documented driver shortages impacting supply chains in every sector. Samuel Hunt, of Materials Market, warned that as more retailers invest in their e-commerce capabilities, drivers working in construction could seek out opportunities and higher salaries with supermarkets and other consumer brands.
Changing consumer behaviour
The swing towards e-commerce, driven by the pandemic, led to more builders’ merchants investing in their online shop – creating a seamless and convenient experience for customers. It has also created new opportunities for businesses to digitise their back office processes using off-the-shelf solutions to manage invoicing, purchasing and marketing - helping to maintain positive cash flow and improve efficiency and productivity.
As Cass Heaphy, digital director at Paving Direct, concluded: “All businesses need to fully adopt digital strategies that allow them to provide consumers with the products and services they need remotely and in a joined-up omnichannel way.”
The drive for sustainability construction practices is an opportunity for the industry to not only make a difference to climate change but also secure more work building and retrofitting energy-efficient buildings.
Demand for sustainable solutions grew following COP26, as George Evans, national sales manager for BN Thermic, explained:
“We saw an almost overnight spike in demand for electric industrial space heating systems. Business owners were immediately looking to reduce their carbon footprint and explore more sustainable heating options.”
Samuel Hunt, of Materials Market, said the move towards sustainability was ‘positive’ but expressed concerns about the impact on firms. He said:
“It puts pressure on the already stretched pandemic resources of construction companies to invest in a greener, more sustainable future. Combined with all of the other problems facing the industry, this will prove a challenge for many businesses across the UK.”
Peter Sayce, chief product officer at Bramble Energy, said businesses were calling for clarity on how the industry could meet its decarbonisation targets to ensure they didn’t get left behind:
“As we move closer to 2050, it is likely we will see more penalties for businesses not committing to decarbonise their operations. In mainland Europe, firms who bid for major public work have lost out as their proposals don’t consider the impact of their emissions. Surely this will be the same in the private sector. How do we make sure no-one gets left behind?
“Accessibility will be key, not just in terms of support from government but access to the green solutions and materials that could make a real difference in decarbonising the sector. Switching to zero-emissions vehicles and plant on-site and for transport is a great place for any firm to start. These solutions are already widely available. The issue of scalability remains important too. Scaling and serious investment from both public and private sectors will mean that smaller firms won’t get left behind as we adapt to clean technologies and methods.”
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