Playing the long game

Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.

It is a truth, universally, accepted, that a journalist in want of a story, must be attracted by tales of bad news as well as good. Bad news is good news when you have column inches to fill.

In the case of this august publication tales of branch openings, developments, and acquisition are as welcome as those of closures, liquidations, sales and administrations. Sad, but true. I have space to fill. For example, according to the latest data analysis from Insight Data, there was a dramatic spike in builders’ merchant insolvencies for January 2025, more than doubling from seven in December 2024 to 19 in January.

It’s tough out there, no one can deny that. It was tough last year too, and the year before that too. Why? Any number of reasons: the market readjusting itself after the post-Covid boom, rocketing energy prices, supply chain issues, interest rates, householders worrying about cheap fixed rate mortgage deals coming to an end, housebuilders holding onto development land until they know they can sell what they build, general consumer confidence – or lack of it. All things which affect what gets bought and sold in this market.

It’s not just that the market is tough. Companies that carry a lot of debt have an extra issue to deal with. In 2019, UK bank interest rates were below 1% – at one point, during the Covid pandemic, they were almost 0%. Since  November 2021, they rose steadily to 5.25%, where they stayed for the best part of a year. If you are a company with a lot of debt to service, that rise in interest payments hurts. You can pay the interest on that debt easily if you are making sufficient money to do so, but it gets more and more difficult the tougher the market conditions become. So you try and cut costs – stop recruiting to replace people who leave, cut staff numbers, delay supplier payments, even shut branches, but that impacts your ability to service the customers you do have, which might in turn reduce the number of those customers willing to do business with you.

This isn’t a problem that’s confined to the building materials supply chain, just in case anyone thinks I’m picking on them. Hospitality, for example, is rife with chains that over-expanded when money was cheap, and which are now struggling to service their debt costs in an environment where the battle for consumers’ disposable income is very real. Retail too, it’s also what did for The Body Shop and BHS (along with a lot of other financial smoke and mirror shenanigans). Huge levels of debt are also a small part of what has turned Thames Water into a complete sh*tshow.

Back to this sector though. Here’s a list that no-one really wants to be on: The Builders Merchant Company, Hitchcock & King, Folkestone Fixings, TG Howell, Drakes Plumbing Supplies, Blanchford Building Supplies, Troy, Paintwell…Those are the ones I can think of off the top of my head.  All in the hands of administrators.

Luckily for some of these though, that there are other parts of this sector that are able to step in and help out, saving jobs and livelihoods. Not just for that reason of course, but because they can see the opportunities to expand and grow their own businesses.

We’re hearing a lot about sustainability at the moment, and mostly that’s in terms of the circular economy, getting us the net zero, helping to reduce the environmental impact of this sector on the planet. Sustainability also means being here for the long term, it means staying in business in the future.