It has taken some time, and a lot longer than many would have liked, but it finally looks like manufacturing lead times are back to pre-pandemic levels. It has been one of the most serious problems our industry has had to tackle in recent decades.
However, as one problem passes, another one comes along and poses just as serious a threat: the energy crisis.
Energy crisis threatens fenestration supply chain
I don’t know about you, but we are regularly bombarded with marketing emails from suppliers touting for businesses saying they can get their windows to us in a couple of weeks, or bi-folding doors in five days. Remember during the height of the pandemic and worst of the supply chain crunch when manufacturers couldn’t take on any new business because they couldn’t handle it?
Those days are now firmly behind us, and I think many are relieved. A mix of rapidly slowing demand and supply chains adapting to new conditions has meant the supply of products all the way down the fenestration supply chain has stabilised. Even the price of resin has started to creep down.
But as that problem subsides, another, perhaps even more serious issue, is becoming more pressing. The energy crisis is one that threatens every person in this country. As we are all fully aware, energy bills for both homeowners and businesses are going through the roof. The Government support announced by Liz Truss isn’t enough to stop bills increasing. Although money has been set aside to keep the energy price cap for homeowners at £2500, this does not mean families will pay that. The figure of £2500 is based on “average” use and the price per unit of gas and electricity. If you use more than that average, you can still be billed a lot more than that. The cap in reality really isn’t a cap at all. Millions still face painful energy bills.
For businesses, the outlook is worse. There is no “cap” for businesses. Even with these new energy policies businesses of all kinds, including fenestration, face new energy bills six to eight times what they were in previous contracts. Just take that in for a moment. Look at your current energy bills and times that by eight. Think of the effects on a business that kind of increase has. That’s not to say all businesses will get hit like that, but a great number will. You then have to factor in rising rents, business rates and other costs that keep going up. For context, our energy bills are going up six-fold in November.
The result of this will be more price inflation. Although material costs have levelled off, albeit at a much higher place than before the pandemic, the rampant energy price inflation will offset any benefits. The result will be higher prices once again at the end of this year and into 2023. Consider that this is against a backdrop of recession, perhaps a long one, where the public are facing higher costs across the board.
Price inflation is nothing new. We’re used to it now since the middle of 2020. But the longer it continues in an economy where the cost of living crisis gets worse, the harder it is to stomach passing those increases on to the end users.
Keeping the lights on
Perhaps the more imminent threat on the horizon for the fenestration supply chain is the risk of rolling blackouts. Yes, get ready to party like it’s the 1970s. Over the last few weeks, the Government and Ofgem have been increasing their warnings and changing their language about the possibility of rolling blackouts over the Winter if the UK cannot meet energy demand.
They have stated that these blackouts could happen either in the morning or somewhere late afternoon, between 4pm and 7pm for example. For the manufacturing part of our supply chain, this would be rather difficult to manage.
Warnings would be given in each region as blackouts approached, so it may be possible to plan and mitigate effects. For example, if fabricators knew when the power was going out they could push their frame rate up to compensate for the downtime. Easier said than done of course. In all likelihood, it would cause severe disruption to the running of our manufacturers in this sector, which would then have knock-on effects for installers in the form of delayed deliveries and lengthening lead times.
Of course, blackouts in Winter would be disruptive for our entire sector, and not exactly conducive to running a good business. We don’t know how it plays out for sure. We could have a mild Winter with less pressure on power supplies, which would be an upside surprise. A harsh, long and cold Winter would see much higher demand for power and could lead to the forewarned power cuts. Putin is likely to cause further disruption to energy markets due to his war in Ukraine, which will have ripple effects across Europe too.
For fenestration and the supply chain within it, navigating this next crisis will be as difficult as the material shortages crisis. There will be effects we can’t yet predict, and secondary issues will spring up from the primary ones. Where we can, it would be prudent to cut back on energy usage where we can, without it having a detrimental effect on the running of our businesses. Find efficiencies in energy where possible, work smarter and find ways to mitigate the predicted problems ahead.
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