Another month and another inflation figure that surges past all previous estimates. UK inflation in November spiked to 5.1%, up from 4.2% in October. This blows past estimates of 4.8% and the prediction from the Bank of England that inflation in the UK would rise to 5% in Q1 of 2022.
This is a further prediction that has underestimated the pace of inflation in this country and will add more pressure on the BoE to act. The idea that this has ever been transitory is now a joke and perhaps one of the worst calls the central bank has made in decades. There were murmurs that things were perhaps starting to settle down. These figures out today suggest otherwise.
For those that work in UK fenestration, you all know how fast and how high prices have been rising now just in 2021, but in the latter stages of 2020 as well. We have been working in this inflationary environment for a very long period of time. This is a set of circumstances that many of us have never faced during our time in this sector.
We have also been getting predictions of when things may calm down very wrong as well. At the end of 2020, I remember seeing forecasts that the start of 2021 would see a gradual slowdown. That never came. These predictions were then pushed back to Q2 of this year, then Q3, then Q4. The reality is that we cannot really know ourselves. Some are saying Q2 of 2022 could be the time when the house of cards comes tumbling down. Some believe we’re at the start of a multi-year cycle of much higher demand for home improvements.
I personally would side on the Q2 of 2022 forecast that we’re in for a hefty slow down, but again, no one has called this right so, in the end, only time will tell. However, what is clear to me is that rising prices in this sector, and indeed the wider economy, is going to remain a massive issue in 2022 and it is something we have to be acutely aware of as we enter a new business year in a few weeks time.
Inflation is going to be one of our biggest challenges for 2022 and we have to deal with it on two fronts. The inflation in our own sector, coping with very high price increases coming from all sides very regularly. In some cases every couple of weeks. We also have to deal with wider economic inflation which is going to impact people’s ability to spend.
We cannot bury our heads in the sand over this. Inflation in the UK is going to be a real problem and we have to be proactive rather than reactive.
What we can do to fight inflation
UK inflation isn’t going away, and it is going to affect everything and everyone. So, rather and sit around and hope for the best, UK fenestration has to be on the front foot in dealing with what is likely to be one of the most serious problems in the coming year.
First, the supply chain has to continue to pass on increases right down to the homeowners and end-users. Do not fall into the trap of believing that companies further up the supply chain are making an absolute mint on every stick of profile that comes out of the door. Each metre of profile is sold for only a few pounds, and the amount of money spent to create that metre of profile means the profitability of that product is marginal. Hence the need to sell millions of metres of it per year to make any decent amount of money. The same goes for fabricators. Many work on profitability in the single-digit percentages and any hit to their own costs immediately affects their profitability.
Installers have to continue to pass on price increases to their customers. Profit margins have to be protected when costs are rising and absorbing everything that filters down is only going to result in bad news for the business. The past 18 months have shown that the public can weather the higher prices. I suspect there is slightly more wiggle-room with the consumer to pay higher prices. How long that continues will remain to be seen, but I feel like we’re approaching a limit, and in some regions we may already be there.
Marketing to the public also has to ramp up, and significantly. December looks to be pretty quiet out there, and January could be a rough month too. Inflation is biting, people will be paying off Christmas and generally, it’s a low-spending month. This is the best time for our industry to get out there and get our message across to the public and show them that investing in new windows and doors for their homes is the right investment during this time. We cannot as an industry afford to let the sales pipelines slow down. We cannot rest on our laurels because we have a few months of work already booked in. A couple of quiet months will quickly wipe that out and we’ll find ourselves back to 2019 lead times.
We also have to up cash flow. December is a short month and January is quiet in terms of sales. But bills still have to be paid. This is why the start of a new year can see a spike in companies going under. Cash is king, and companies up and down the supply chain have to make sure that they maintain good inflows of cash. This means getting paid on time, keeping new sales coming in, taking healthy deposits if you’re an installer. Any pause in regular cash coming in could be highly damaging.
I think the most productive thing we can do in the coming months to combat UK inflation is to vastly increase marketing to the public. Create a new swathe of leads at a time when business activity is traditionally lower. And with the Omicron variant causing a huge amount of concern, anything we can all do to create new business is going to be worthwhile.
To get weekly updates from DGB sent to your inbox, enter your email address in the space below to subscribe:
By subscribing you agree to DGB sending you weekly email updates with all published content on this website, as well as any major updates to the services being run on DGB. Your data is never passed on to third parties or used by external advertising companies. Your data is protected and stored on secure servers run by Fivenines UK Ltd.