Against expectations, inflation in January rose once again, for the fourth month in a row, to 5.5% from 5.4% in December. Whilst 0.1% might not seem all that much, it was predicted that rates would either remain stable or dip slightly due to the festive period.
The outlook doesn’t look any better in the months to come. As an industry that can be very sensitive to external economic issues like this, UK fenestration needs to be nimble to the challenges ahead.
7% inflation and beyond
The official prediction is for inflation to peak at around 7% during the Spring. Given the track record of the Bank of England when it comes to estimating inflation, I’m not going to bet my house on this. My own personal feeling is that we’re going to sail past 7% at some point.
Shaping that view is the short term outlook. In April energy bills are going to rise a whopping 54%. Those rises will be factored into April and May figures. Also in April VAT paid in restaurants will rise from 12.5% back to 20%. This will then filter into the April and May inflation figures. Then we have National Insurance that is also going up in April. Add into the mix oil nearing $100 per barrel and you have a mix that may well push inflation beyond 7%.
April is shaping up to be a very expensive month for the cost of living in the UK, amidst a squeeze that is already hitting hard. Whilst this seems like an external factor to the fenestration sector, rising inflation and higher costs of living are both elements of the economic fabric that do have a direct impact on us.
How it hurts and how to manage
What’s happening now in the economic landscape has a number of effects on the fenestration sector. Inflation is something we all know about. For the best part of two years, we have all been having to get used to weekly emails notifications of price increases in double-digit proportions. Too much demand coupled with supply chain disruption has forced our raw material prices through the roof. The end result was the homeowner paying much more for their new windows and doors prior to the pandemic.
Inflation for the homeowner, with the cost of living becoming quickly more expensive, effectively takes spendable money out of their pockets. Wages are not rising fast enough to keep pace with inflation. Having less disposable cash to spend means families will begin to question what they need to spend their money on versus what they wish to spend their money on. Big-ticket items such as new windows and doors, as well as frivolous purchases, fall down the list of priorities.
The other thing to factor in here is confidence. If all homeowners see is rising bills and more money leaving their accounts, spending confidence drops. Any economy is as much about goods and services as it is about confidence. It is the lifeblood of any sector or market. Right now, that confidence is being hit from multiple directions.
Our sector now has to compete in a very different marketplace. In the previous two years, with foreign travel firmly off the table, and most other parts of the economy closed, ours was one of the few sectors that could operate. As a result, we were in the very lucky position of having much more attention than we normally did. Things however have now changed. The economy is fully open, foreign travel is a lot easier and there are many more things for people to spend their money on.
We have to become much more visible and much more active in front of the general public if we are to keep the attention on our sector as high as it has been. The lure of a holiday or more nights out is going to take money away from our sector and towards others. Marketing activities, advertising, video content etc all has to be stepped up from now to ensure we stay as visible and attractive as possible. Remember that our sector has grown significantly over the last couple of years, with many expanding their businesses to manage that extra work. That has to be maintained to be able to afford those expansions. Any regression will see jobs lost and progress given back.
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