With the impact of Brexit now starting to bite, understanding long-term industry drivers is now more important than ever, according to Palmer
The window and door industry is ‘not immune from the impact of Brexit and faces strong economic headwinds’ – that’s the warning from Robert Palmer. According to the head of the research specialist, the UK window industry faces dual challenges of a tougher second-time replacement market and wider economic uncertainty as the UK exits from Brussels. “The post-Brexit phoney war is coming to an end and the realities of what will result in the case of a hard Brexit are now beginning to dawn,” he says. This, he argues, is already exerting an impact on consumer confidence and with it economic growth. This slowed in the first quarter of 2017 to just 0.2% – the weakest in 12 months. “The Office for National Statistics attribute this slowing to the decline in growth to consumer-facing industries and a slowdown in household spending,” Palmer says.
Big ticket items
He adds that this has also been evidenced in figures from payments provider Visa, which reported the steepest fall in consumer spending for four years this summer. Visa also highlights a cut back in spending on big ticket items. “This is also noted by researchers GfK which recorded a major dip in the number of consumers considering now to be the right time to make big-ticket purchases,” says Palmer. He continues: “Consumer credit is not inexhaustible. According to the Bank of England consumer credit grew by 10.3% in the 12 months to May, higher than expected. Some economists say that consumers are confident enough to increase their borrowing. “But the financial regulatory bodies have signalled their concerns about difficulties some consumers will have in making repayments. With inflation rising and wages static the reality is that consumers’ disposable incomes will continue to fall.”
Trends in housing are another area, which Palmer suggests may curb growth in the window and door sector in the coming year. He says: “The housing market has slowed, partly as a result of increases in stamp duty and changes in tax on second homes and investment properties and partly because of the availability of property. “From strong double digit growth in 2013 and 2014, housing transactions barely moved in 2015 and 2016 and look set to actually decline in 2017 particularly in London, where issues surrounding affordability are most acute. “This isn’t necessarily all bad news – some rebalancing and cooling of house price inflation is perhaps inevitable and to be welcomed, especially if more new homes can be built to ease issues of supply. The negative for the window and door industry is that there is a direct link to house moves and investment in home improvements.” Palmer returns, however, to the argument that it is uncertainty surrounding Brexit which is the greatest threat to UK economic growth.
“The ill-fated General Election is seen by some as an opportunity to soften the Brexit terms or even, though much less likely, abandon the whole process altogether. That is debatable but what it did do is to increase uncertainty. For instance how long will May remain as PM with her hard Brexit agenda? Are the soft Brexiters now in the ascendancy? And for that expected, unexpected event, who is actually in charge?” he asks. With a new study due for publication at the end of the summer, Palmer refused to be drawn on a detailed analysis of the window and door. He suggested, however, that tougher second-time replacement sells and the shift away from home ownership, are driving long-term changes of their own. According to figures published by Palmer in its last report: The Window, Door and Conservatory Markets in Housing in Great Britain (Oct 2016), first time window and door replacements have dropped from 80% in 2000 to less than 30% in 2015, with ‘replacement of replacement’ installations now accounting for 70% of all installations.
Focus on aesthetics
He argued that this was driving increased focus on aesthetics: “Homeowners want something that is tangibly different and the appearance of windows is increasingly important in the market,” he said. “That in turn is driving innovation in the industry and the shift to premium finishes and foils in retail markets. While there will always be a place for standard budget white PVC-U, there has been definite shift in consumer expectation.” He added that this shift to higher end-offers was also driving growth for aluminium and significant growth in sales of aluminium bi-fold doors. He also forecasts ‘exponential growth’ in the solid roof conservatory market as a second key area of opportunity. “This is to a degree the point,” continues Palmer. “Things are in our view going to be tougher but that does not necessarily mean that all parts of the industry will struggle. If the economy slows, as we are expecting, then, as always, high end and innovative products are more likely to weather the storm, while cheaper commodity products will become more vulnerable.”
Tel: 020 83908131
E: info@palmermarketresearch.co.uk
The post Understanding long-term industry drivers appeared first on Windows Active Magazine.
Morley Glass and Glazing has been shortlisted for IGU Manufacturer of the Year at the annual National Fenestration Awards.
According to Corgi Fenestration, many original MTC cards are expiring this autumn and through 2018 and need to be renewed.
North-West installation specialist, Droylsden Glass, has announced that it has become the latest firm to partner with Dekko.
Recent Comments