As you may or may not have noticed, the end of 2019 and the start of 2020 hasn’t exactly been rosy for the UK fenestration industry. The last few weeks of last year and the start of this one has seen a number of well known names fall into administration/liquidation. The market has been choppy for a considerable amount of time now, but perhaps the number of companies failing and the speed at which they have failed has taken some by surprise.
Some of the more high-profile names have been featured on here. But if you do a quick check on The Gazette under the Insolvency section and enter the terms “glazing” and “windows” into the search bar you’ll see a very long list of companies that have closed their doors.
So is this a wider sign of things to come, or is this a bad hangover from 2019?
2020 remains positive
Despite the choppy nature of things right now, 2020 is still forecast by most of those I talk to as being a good year for business. I suspect that what we’re seeing right now is a bad hangover from what was a rough year for the sector in 2019.
Its well known that profit margins have been squeezed massively over the past 12 months, with business activity subdued in 2019 thanks to political uncertainty over Brexit. However, we now have a return to functioning Government with a big majority. It means legislation can be passed. There is the small matter of a trade deal to try and get done by the end of December, but for at least these next 12 months we know that the UK parliament is going to be dissolved for another election for another 5 years. That makes a difference trust me.
There remains however a question mark as to whether the UK is slipping towards recession. It was predicted last year by certain “experts” that no UK recession was expected in 2020. That prediction has been pushed to its limits with GDP data only keeping the UK in growth up until now. Today it was forecast that UK GDP actually shrank 0.3% in November. Do we take that as a sign that we’re on the edge of recession? Maybe. I think there is a heavy political effect in that number, as people put the brakes on spending until they were sure of the election outcome.
Those negatives aside, many of who I talk to see the clear path forward created by the election result as a door to a better year. Many hope that money being held back by home owners and businesses in our sector will begin to flow again as confidence is already showing signs of recovery.
Worse before it gets better
January and February are naturally the worst times for the fenestration industry. Business activity falls off a cliff towards the end of the year as home owners focus on Christmas. This was made worse this year due to the timing of the General Election. Those who have not filled their order books by the end of the year or don’t have enough fitting booked in for the early part of the New Year will suffer from poor cash flow.
These first two months can be really tough when it comes to winning new business and keeping a healthy cash flow. That in itself can be the reason a company has to close it’s doors. So as we enter the middle of the first month of the year, I don’t think that we have seen the end of the chain of companies going into administration unfortunately. Things may get worse before they get better.
However, there is light at the end of the tunnel. Good businesses will already be signing up work now to be installed in 4-6 weeks time. That means deposits being taken, orders being placed with suppliers and fitting dates being scheduled. Companies can plan their cash flow as they know whats due to come in. Whilst that planning is going on, they can install what was sold at the end of last year and look towards a natural upturn as we leave January behind. All being things stabilise from there and we start to see a drying up of the flow of companies struggling.
As you know, we have our own family run installations business. We were positive about 2020 and saw signs that things were going to be better. As we opened back up after Christmas we were welcomed with close to 50 composite door leads generated by ourselves and Solidor who are our suppliers. It took some doing but all those quotes are now out! What we have also been pleased with is not only the number of appointments being made and people coming into the showroom, but also the quality of the leads being made. There are no single doors or a couple of windows. All leads so far have been for substantial proposed work. If we land even half the leads then we’re going to be in for a good couple of months. Hopefully this is a sign of things to come for the rest of the year.
I know that the coverage on DGB has been a bit negative, and its no fun publishing these articles. But what is happening to the industry right now is significant and it has to be recognised. I remain positive however for the rest of the year. Once we get passed January and February I think we’re going to start seeing much more positive commentary.
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