John Sinfield BMBI’s Expert for Mineral Wool Insulation: Quarter 4 2017

By Knauf Insulation UK & Ireland
February 27, 2018

In 2017, the housebuilding industry came under greater scrutiny than ever before: the much discussed and continued skills gap, the ability of young people to buy their first homes and, of course, the tragedy at Grenfell Tower. Despite this, the industry continued to make progress, particularly on the point of the housing shortfall, hitting the Government’s target of building 200,000 homes in England for the first time since it was set.

This strong year for housebuilding is reflected in the latest Builders Merchants Building Index (BMBI) - the newly released Q4 figures for 2017 reveal sales (value) growth of 6.3% on the same quarter in 2016. Full year-on-year figures show 4.8% growth on 2016.

Outside of outputs and targets, 2017 was also a year when housebuilding policy focus seemed to take a new direction, moving away from demand-led to supply-led solutions. This was underlined by the Chancellor Phillip Hammond in his November Budget, where he committed £15bn of new support to the sector, with particular help aimed at smaller builders and developers.

And it appears that we have begun to see these supply-led solutions, coupled with existing schemes aimed at stimulating housing demand – the most high-profile being Help to Buy – drive the market forward. February’s Office for National Statistics report on construction output showed that £3.38bn of work on new housing took place during December, the highest amount this decade. Those of us in the building products and merchant sector should expect this increase in housebuilding momentum to continue to drive sales in the coming months.

On the commercial side, it would be remiss of me not to mention the impact that the collapse of Carillion will have during the coming months and even years. The reverberations will be felt throughout the supply chain, from large contractors to smaller merchants and stockists.

A key issue raised by this event is the sustainability of contractors’ margins. In a market environment where major contractors are required to feed the top line by focusing on aggressive bidding and winning contracts on poor margins and terms, it only takes a couple of hiccups on projects or payments for businesses to fail.

This ‘race to the bottom’ mentality is a problem for the entire construction supply chain that must be addressed for our industry to prosper. I hope that 2018 will see us all take some steps forward in this area.