It’s been a rather grinding start to the new year during it’s opening week. The Middle East continues to tear itself apart, with a new, rather nasty rift opening up between Saudi Arabia and Iran after the execution of a Shia cleric. Oil is now at lows not seen for 13 years, which is causing joy at the pumps, but was the cause of one million job losses around the world in the energy markets in 2015. The Chinese economy appears to be putting on the breaks harder than most people thought, with their stock market closing twice in early trading this weeks after the stock exchange crashed more than 7%. Global markets, including the FTSE 100, have had their worst opening week in years. The IMF has downgraded the global growth forecast again.
Make no mistake, the mood has changed and things are not going to plan. To that end, George Osbourne on Thursday made a speech in which he made it clear that the UK still had a way to go and that we were very much at risk from the many problems plaguing the world right now.
So, what are the main risks to the UK window and door sector this year? These are my top 5:
Worsening global economy
Unfortunately, the UK economy is not immune from the effects of the global economy, and as that becomes weaker, so will ours.
I watch Bloomberg regularly (yes I know that is quite nerdy) and all of their financial experts were starting to sound very concerned about the global economy, and were pulling in market similarities to the 2008 financial crash, which of course no one wants.
So what does this mean on the ground? It means that if the public see our own economy at risk, and with thoughts still fresh from a few years ago, there will be a temptation to tighten belts once again. And first on the list of things to go will be big ticket items – such as new windows and doors. We don’t sell day to day products as an industry, so the stuff we make and install will be shoved down the bottom of the list, along with cars, kitchens and expensive holidays.
With immediate media, any big swings in the economy and the public will react very quickly. I’m sure we all remember how quickly business stopped in 2008 when the banking system nearly collapsed.
There continues to be a serious shortfall in the number of skilled and young workers coming into the window and door industry. It’s a problem that is currently crippling our construction sector across all facets.
The Government has set itself a target of building 200,000 new starter homes by 2020. It’s an unrealistic target as we haven’t been able to build anywhere near that number of homes for years. In fact, various reports say that we actually need to build 250k new homes per YEAR for the next few years just to satisfy the existing demand.
But even if we could build 200,000 new homes by the next election, we don’t even have the skilled workers to be able to do it. We’re short of brick layers, roofers, plasterers, plumbers, electricians, window and door installers and any other trade you can think of. We’ve neglected the trades in favour of universities for far too long and now we’re paying the price.
In the end it will mean the houses won’t be built, which creates a drag on the economy and products like windows and doors which would have been made and installed remain unmade and uninstalled.
We’re all happy that pump prices are hitting multi-year lows. Our tanks are costing us less to fill, and inflation has been flat or less for a long time. There’s a few more pounds in the pocket either to save or spend. But there is a very serious flip side to this coin.
It’s easy to forget that industries directly linked with our own, like steel, like oil etc are responsible for the employment of many thousands of people in communities up and down the UK. Unfortunately, the crash in commodity prices has led to the losses of tens of thousands of jobs around the country over the past year. In fact worldwide, over 1 million jobs were lost in commodity industries in the past year.
The communities that are centred around commodity based jobs are suffering. The local and wider economies are suffering because of the retreat in jobs and investment. It means for those communities, big ticket items like new windows and doors are put on the back burner.
With commodity prices predicted to stay low for the foreseeable future, the futures for commodity based communities doesn’t look great.