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For the tool trade this is clearly a serious concern, and keeping on top of the situation is going to be key to developing the best business plan to deal with the changing commercial environment.
Construction output is expected to decline by seven per cent during the next three years, before a return to growth in 2011 at the earliest, according to the latest industry forecasts from the Construction Products Association. Yet, despite this recovery, housing starts in 2012 will remain below their 2007 levels.
The economic slowdown and volatility in the financial markets has already had a significant impact on the private housing market, which during both this year and next will see the fewest number of housing starts for 60 years. However, this turmoil is now undermining other parts of the industry; this year has experienced a dramatic fall in the construction of industrial buildings and the future prospects for commercial development is also looking exceedingly poor.
This decline follows thirteen years of unprecedented growth, which saw output across the industry increase by 32 per cent from 1994 to 2007, but output is now expected to fall by two per cent in 2008 and almost five per cent in 2009.
In contrast, public sector investment has continued to increase, supported by the capital programmes announced in last year’s Comprehensive Spending Review. The immediate future for investment in education, health facilities and transport infrastructure continues to be positive, but with public finances now very weak, coupled with lower tax revenues from the economic slowdown, the position after 2010 is expected to worsen.
Commenting on the Forecasts Report, Michael Ankers, Chief Executive of the Construction Products Association said; “These Forecasts are without doubt the gloomiest we have produced since compiling this information and have been downgraded from just three months ago to show the sharpest downturn since 1991. The prospects for the industry over the next few years are very precarious therefore it is critically important the government maintains its spending plans in order to deliver the much needed investment in our schools, hospitals, infrastructure and other public sector investment. With shrinkage already being experienced in privately funded new work the industry is certainly in for a bumpy ride as output falls to levels last seen in 2002. Turnaround is now expected in 2011 at the earliest although the housing starts per year will continue at an historic low until 2012.”
With the government promising to increase spending on public projects in order to ease the recession a report from the Federation of Master Builders (FMB) is of interest to our sector.More homes are still needed to house the 1.5 million people on council house waiting lists, warns the FMB.
Brian Berry, Director of External Affairs at the FMB said: “The fact that Britain is suffering an economic downturn doesn’t take away from the fact that there are thousands of families in this country who still need affordable housing. It’s nothing short of a scandal that we have 90,000 families living in temporary accommodation and over 1.5 million people on council house waiting lists. Now is not the time to abandon housing targets”
Berry continued: “The solution to the housing crisis is to develop a ‘bottom-up approach’ with an emphasis on working with local communities to provide the homes that every village, town, and city requires. An emphasis on quality would help overcomes many fears about new housing as would making the planning system speedier and more efficient to deliver new homes.
“The Government also needs to think about our existing housing stock. A clear, coherent and, most importantly, achievable strategy is needed to ensure that our existing homes are brought up to standard. Facing the challenge of existing housing would also provide an opportunity to bring the seven million homes, in England alone, which the Government says are substandard up to scratch. Making homes more energy efficient, at a time when fuel bills are rising, would benefit millions around the UK, especially the five million currently living in fuel poverty.”
For tool retailers who have a strong customer base amongst contractors dealing in the public sector the FMB report and the government’s claim that it will focus on public works spending may offer some comfort, at the other end of the market reports on the mood of consumers are less promising.
Consumer confidence has fallen to new record lows, according to the latest consumer confidence survey from market research company Nielsen and the British Retail Consortium (BRC).
Eighty four per cent of people in Great Britain now believe the country is in recession, up from 65 per cent in May. Only 18 per cent think the country will be out of recession within a year.
The twice-yearly survey asks consumers their thoughts and feelings on job prospects, personal finances, spending intentions and major concerns.
The consumer confidence index for Great Britain has fallen from 79 points in May to 74 in the latest poll. For comparison, the index stood at 94 this time last year and peaked at 101 in spring 2006.
Sixty per cent of people in Great Britain think their own personal finances are ‘not so good’ or ‘bad’, 69 per cent of people said that now was ‘not a good time’ or a ‘bad time’ to buy the things they want or need and 70 per cent said they thought their job prospects were ‘not so good’ or ‘bad’.
This latest dip in confidence is driven by an increase in the number of people becoming concerned about job prospects. In May, 14 per cent of respondents thought job prospects were ‘bad’ but in the latest poll almost a quarter (23 per cent) of respondents said job prospects in Great Britain will be ‘bad’ in the coming 12 months.
When asked about their major concerns, 39 per cent of Britons said that their biggest or second biggest concern was increasing utility bills. All of the top ranking concerns were in relation to the increasing cost of living, debt and the wider economy.
Stephen Robertson, British Retail Consortium Director General said: “With only one in five people believing recession will be over this time next year, it’s certainly going to be a tough Christmas and New Year. But there are reasons for optimism. The Bank of England’s shock rate cut should get the economy’s heart beating again. Some key costs are falling, bringing shop prices down, and retailers are fighting back with promotions and price cuts. This can be good time to be a customer.”
However for tool traders the fact that fewer people are moving home may seem some growth in trade, with home improvement taking the place of moving to a new home, it is a situation worth watching.
One thing is sure, it is now as essential as ever to concentrate on the key areas that make a business one of the successful ones in any economic situation: competitiveness, customer service, and public awareness. If a business does what it does well, and makes sure people know that then there is no reason it shouldn’t succeed.
By Roland Ravenhill
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Airstream Communications