Initial industry changes in response to Covid-19 restrictions
The closure of all but essential shops and businesses throughout this last year means that there are still delays and problems with procuring some types of materials. Companies across the world have had to make major changes to the ways they operate, in order to continue to work safely and prevent the spread of Covid-19.
During the first lockdown many suppliers completely closed for a few weeks. Managers used the initial closures to update their facilities in order to reopen with confidence that they could operate stores safely with the new government guidance in place. The second lockdown in England at the end of last year has seen many smaller merchants close their physical stores and opt for online ordering and deliveries only.
Controversially larger DIY stores like B&Q, trade depots and garden centres have generally all remained open in England during the current lockdown despite non-essential shops being directed to close.
Supply issues in DIY construction materials supply chain
There have still been some supply issues with importing certain types of wood, aggregates and furniture from abroad caused by difficulties in logistics. Maintaining the normal flow of lorries and people through countries in Europe and beyond has been more difficult than usual and there have been unexpected delays because of Covid-19 checks and restrictions.
Some international borders have been particularly problematic which has interrupted the normal flow of goods. Store closures have interrupted the normal financial purchasing activities carried out by companies. This has affected the flow of funds between businesses in certain supply chains and their suppliers.
Problems with purchasing supplies like plaster, certain sorts of timber and kitchen worktops have impacted customers looking to upgrade their homes themselves. Availability problems have also affected trades people who are trying to use their expertise to get jobs done professionally, all across the country.
Brexit – the effect on DIY construction industry
Aaron Morby wrote in Construction Enquirer last week that last year the value of construction contract wins fell from £40 billion to £28 billion in the UK and he asserts that both the pandemic and Brexit uncertainty are the causes of this fall in demand. (1) On a more positive note, Mr Moby reported on Thursday that the figures just released show the construction industry has now returned to pre-Covid levels of turnover. (2)
However this data could be artificially inflated by government spending on infrastructure projects with borrowed money. This may not be a sustainable strategy in the long term.“Realistically the fallout for businesses from Brexit could yet take months to fully understand which means an element of volatility in the short to medium term.” said the Construction Enquirer expert. (2)
This summer Boris Johnson’s government has relaxed a lot of planning regulations in order to encourage the building of new houses and accommodation for the UK’s aging population. It is now possible to build up to 2 storeys on the top of most residential homes. This is a strategy that mirrors increasing the size of houses on the continent, in places like Malta, to provide more bedrooms and facilities for multi-generational living.
Matthew Lane of Property Investor Today suggests concentrating on helping UK suppliers and improving trade skills in England, Scotland, Wales and Northern Ireland is key to keeping the construction industry afloat during these changing times. There has been a sharp decrease in skilled contractors from European countries wanting to work in the UK because of Brexit regulations and this will cause a decline in the quantity of projects completed in 2021. (3)
In Hampshire agencies email their professional contacts daily with requests for local builders. Members of the public frequently post ‘builder wanted’ adverts as presently there is a shortage of builders compared to the demand. Examples of the work offered are building garages, outdoor lodges and extensions. New room layouts are popular for private customers looking to expand and reorganise their interior spaces during the current lockdown. Creating new study areas and improving sound privacy where needed have also been important, as adults and children both try and work from home.
Some DIY departments saw big losses in 2020
In general UK consumer spending was down 7.1% last year according to DIY Week which quoted Barclaycard’s findings. 2020 was a year of changes and surprises in many ways and the DIY sector saw an overall increase of 9.8% as the public looked to save money and finally make time to tackle their DIY To Do lists. (4)
“Big-ticket items, such as flooring and kitchens, were particularly adversely affected by the turmoil and have consequently seen double-digit declines.” stated Businesswire in September 2020. (5)
There was also some positive news in the DIY sector in 2020
Howdens posted a press release to say trading had been stronger than expected in the last quarter of 2020. The company announced that the profits were due to be higher than initially expected with profits of over £150 million expected in its latest report due next month. (8)
Industry analysts predict that Kingfisher which owns B&Q will report a 11% rise in sales at the end of January 2021. Similarly financial analysts also forecast that Screxfix will also add 5% onto their predicted sales increase, compared to last year’s total income figures. The experts predict a rocky year ahead for the DIY supercentres and that growth will return again in 2022/3 as the market bounces back from a lot of instability. (9)
Garden sheds, paint sales and anything to do with gardening like garden furniture for example had a bumper year in 2020. Materials that are needed for easy redecorating activities were lapped up by families looking to make the most of being at home together for many weeks in a row. The good weather in the first lockdown last spring encouraged the fashionable trend for gardening, sprucing up and remodelling the outside yard space in order to create useful and beautiful ‘outdoor rooms’.
The UK property market in most areas is still buoyant fuelled by a ‘stamp duty holiday’ initiative available until later in April 2021. Estate agencies in rural locations have been kept busy by the wish to relocate to the countryside and the coast by many city dwellers who are released by their changing working circumstances. This has a trickle down effect for the DIY and private building industry as residents look to get their pads ready to go on the market. Buyers who have relocated are then hiring contractors as they strive to create their perfect new homes.
The furlough scheme, the self employed support scheme and other government grants have combined with mortgage holidays to ensure that we have not yet seen a dramatic change in the property market in England. As the reality of all the jobs lost and the full financial consequences of Brexit are felt in the city and beyond the private construction and DIY sectors could face the toughest times we have seen for decades.
It is however possible that if the government are able to support British manufacturers and enough of our economy can weather the tempestuous times ahead, that any downward slump will be short lived and a market recovery will be achieved relatively swiftly. Vaccinating the adult population will undoubtedly help consumer confidence and 4 million older and vulnerable people have now had their jabs already according, to the BBC News today.
Many investors are choosing bricks and mortar as a safe bet in an era of extremely uncertain financial markets and very low interest rates. This fact will help keep demand for anything to do with maintaining buildings at a healthy level. Everyone in the UK can make a difference to their local economies by finding out if it is possible to take advantage of one of the government’s green energy programmes such as replacing outdated and inefficient domestic windows.
Shopping locally and buying British, Scottish, Welsh or Irish products where possible will make a difference to the UK’s independent retailers who are struggling to adapt and survive. Small and medium sized building supplies companies need their local public’s custom to keep their businesses running, in an extraordinary time of change to regulations and commercial operations, the scale of which has not been seen since World War II.
(1) ‘Top 100 main contractors weather 30% drop in contract wins’ Aaron Morby, Construction Enquirer, 7 January 2021 ‘Top 100 main contractors weather 30% drop in contract wins’ Aaron Morby, Construction Enquirer
(2) ‘Construction recovers to pre-pandemic level’ Aaron Morby, Construction Enquirer, 15 January 2021 ‘Construction recovers to pre-pandemic level’ Aaron Morby, Construction Enquirer
(3) ‘Insight: how will Brexit affect the UK property market?’ Matthew Lane, 4 December 2020 ‘Insight: how will Brexit affect the UK property market?’ Matthew Lane
(4) ‘Consumer spending declined 7.1%…yet spending at home improvement & DIY stores surged’ DIY Week, 4 January 2021 ‘Consumer spending declined 7.1%…yet spending at home improvement & DIY stores surged’ DIY Week
(5) ‘UK Home Improvement Market Report 2020: Analysis of the impact of Covid-19 and Future Implications’ Businesswire, 17 September 2020 ‘UK Home Improvement Market Report 2020: Analysis of the impact of Covid-19 and Future Implications’ Businesswire