Inflation has proven stickier than first anticipated, and we’ve seen successive interest rate rises in response – the pace of which took markets by surprise. The resulting concerns about mortgage affordability saw housebuilder share prices take a hammering, though at the time of writing they’ve recovered much ground.
Tougher times for construction, then, but this is not 2008. Our sector is still underpinned by solid fundamentals. With an acute housing shortage and a population that continues to grow, the UK needs more homes. Current uncertainty may pause activity, but it’s unlikely to seize up for long.
The other fundamental is that these homes – and all others too – must urgently be made more energy efficient. June saw the end of the Part L transition period, and every new home must now meet the higher standards. We expect the full impact of this change to be felt in the final months of this year.
What does that impact look like?
Simply put – compliance means more insulation. When I talk to customers, many plan to go deeper with loft insulation in response – from 270mm up to 500mm. Likewise, we expect to see an increase in customers building with wider wall cavities of 150mm – to be sure of the in-situ performance of their chosen insulation, and to future proof the home for the next round of energy efficiency changes to come.
More insulation per home should mean merchants see overall volumes increasing. Margins should improve too – as the increased standards create more opportunities to sell value-added products.
In other words, even if other market segments face a slowdown, we expect demand for mineral wool insulation to remain resilient throughout 2023, and beyond.