New report finds price key for builders merchants

A new market report has found that UK builders and plumbers merchants are divided into those chasing margins and those targeting lower value, volume contracts.

The report, from Cheltenham-based market research consultants MTW Research, is based on 90% of the industry and found that average product price inflation rose by 4% in 2009 as manufacturers sought to protect margins.

MTW suggest that increasingly the smaller local and regional merchants are positioning themselves at the lower value end of the market in late 2009, whereas the larger nationals have withstood rising pricing pressure to the extent where they are less inclined to supply to contracts which offer lower margins.

The report highlights a brighter future for the builders’ merchants market, with business and consumer confidence slowly returning in a number of key end use sectors, with demand returning led by public sector projects, domestic RMI activity and increasingly, the housebuilding sector.

Nevertheless, MTW highlight the need for cautious optimism, with a number of remaining downsides in the market cited which are likely to dampen any prospect of rapid value growth, particularly given the likelihood of a cut in public capital expenditure in the near term. According to the report, around 8% of builders merchants remain in the ‘at risk’ category, underlining the fragility of the market in 2009 and into 2010.

During 2009, demand shifted toward lightside building products as the market became more reliant on the domestic and smaller scale commercial RMI sector. With housebuilders now increasingly opening up ‘mothballed’ sites, MTW point to the likelihood of a relatively rapid return to growth for heavyside products given that many housebuilders ran down their inventories during the latter half of 2008 and will therefore have immediate requirements for replenishing materials.

According to the report, pricing pressures should ease in the near term as average product inflation falls from current levels of 4% to around 2-3% by early 2010, although profitability is likely to decline by around 25% over the full year. However, much of this contraction is derived from lower performance in the first 3 quarters of the year, with a much improved trading environment likely in Q4 2009 as volume demand returns from some key end use sectors such as housebuilding and RMI. Whilst there remains some concern that outside the Olympics construction activity, capital expenditure in public sector construction may decline, prospects are for market growth at, or just below inflationary levels for 2010 with a gradual upturn thereafter.

The 270+ Page Report Includes:-

· Builders Merchants Market Sales & Trends 2004-2008, Recession Impact, Key Drivers for Growth in 2009 and 2010

· Market Sales Forecasts & Key Issues 2009-2013, Economic, RMI Improvement, Growth in Housebuilding, Business Confidence

· Volume Share by Companies with Growing, Static & Declining Sales in 2009 – With 99% (+/-3%) Confidence Level

· Industry Mix by Employees, Turnover & Credit Worthiness in 2009

· Builders Merchants Market Total Profit, Worth, Assets & Borrowing 2004-2013, Key Trends & Issues

· Sales Estimates for Each Company, enabling market share assessment.

· Industry Averages – Turnover, Net Worth, Profitability, Liabilities, Assets etc.

· Builders Merchants Ranked by Turnover, Profit, Assets, Net Worth for 90% of Market by value.

· Financial Profile for each Builders Retailer, including MTW’s easy to reference ‘at a glance’ financial health chart.

· Full Mailing & Telemarketing Details & Senior Decision Maker Sales Leads for Each Company in Report.

· 220+ Company Multi-Use Mailing & Telemarketing List as part of the ‘Ultimate Pack’ – Updated Quarter 3, 2009.

Details on how to obtain the report can be found at

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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