A self-made fuel crisis. A CO2 crisis. Food shortages. A gas supply crisis with prices skyrocketing and suppliers going bust. Universal Credit cuts are coming and the end of furlough is this week with a million still on the scheme. Oh, and inflation is rapidly rising.
The UK is facing a severe barrage of imminent cost-of-living increases, and this is not good news for sectors like ours.
Hitting the brakes
The pace of the rebound was not always going to be as fast as it has been over the last 15 months or so. For over a year we have all been running at 110% as our sector, among many others, has sought to keep up with consumers spending their extra cash on their homes. This has provided UK fenestration with a period of growth the likes of which very few of us have ever seen.
Speculation about when this period would end has been wide and varied. One systems company think we’re at the start of a four-year cycle of higher demand for home improvements. Others think that at some point in 2022, somewhere around Q3, things will start to fall away again.
After seeing the array of crises the UK now finds itself in, all of which will directly affect the cost of living for all of us, I think that the slowdown we were all expecting at some point will be coming far faster than most of us had hoped.
I appreciate that this may sound odd considering the circumstances we’re all still working in. Glass shortages are rampant, deliveries are under strain, fitting lead times are being measures in months and not weeks, and most of us are incredibly stressed and drained after such a sustained period of trading. However, looking at the various crises ongoing right now, these are about to start hitting the pockets of the public imminently, if they haven’t done so already. And given the high profile nature of these problems, this is going to hit consumer confidence hard.
Anecdotally, I have been seeing signs that business activity might well be slowing down. I can say that at our place the pace of leads has slowed somewhat, and sales haven’t been flooding in the same way they were a couple of months ago. It does feel to me that consumers are starting to hit the brakes. Remember, Christmas isn’t that far away and if people are worried about money and being able to afford presents at Christmas, they’re going to start looking at where they can cut back. Big-ticket items like new windows and doors are on that list.
Planning for a downturn
How people spend is as much to do with confidence as it is actual money in people’s pockets. If people feel good about things, if they feel confident about the economy and their own personal finances, they will spend quite freely. This is what we have seen over the past 15-18 months with spending on home improvements far higher than we could have predicted.
Now, the environment has changed again significantly in the last couple of months. A shortage of HGV drivers is resulting in food shortages on shelves, fuel supplies not making it to forecourts, and now warnings about Christmas being disrupted. The Government has announced a temporary visa for foreign drivers to come to the UK, but the number announced is paltry and won’t make a difference.
The various problems we have, along with the cost of living shooting skywards, is pushing inflation up far higher than predicted. I have been talking about this for a while and what I have talked about is coming to the fore.
Inflation is now predicted to be at 4% by the end of the year according to the Bank of England. I still think this is behind the curve and they should be looking at something closer to 5%, maybe higher. The point is, the higher the inflation, the less money in people’s pockets which again impacts spending habits. Everything going on right now is hitting people where it matters, in their bank accounts.
Add to that Universal Credit cuts and then the end of the furlough scheme later on this week. One million people are estimated to still be on that scheme. With all sectors now open and running, you have to fear for those on furlough and question why they haven’t returned to work. A big jump in unemployment will contribute further pressure to the UK economy.
To demonstrate how all of this is having an effect, UK GDP growth was just 0.1% in July. This was below estimates. We are at risk here of slipping back into recession unless the Government can get a serious grip on the swathe of problems disrupting the UK right now. The headlines predicting a winter of discontent may not be that far from the truth.
For UK fenestration, I would say it’s time to plan for a downturn. There is no doubt that the economic problems taking place at the moment is changing the landscape once again and the boom period we have been operating under may be about to come to a fairly abrupt end. If you’re an installer with 4 months of work booked in, there’s no need to panic. There is plenty of work ahead to keep the cash coming in.
But for installers, and indeed the entire sector, it’s time to step up the marketing efforts back up again. It’s time to become more visible, more active, more engaging. The fight for people’s money is about to get a lot harder than we’re used to. There are still plenty of paths of opportunity out there, but the free ride we have all been enjoying over the past year or so I feel is about to come grinding to a halt.
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