Spend, spend, spend…actually, don’t

Annual income twenty pounds, annual expenditure nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery

Has the UK home-owning love-affair with all-things DIY and renovation cooled? Have the charms of the new bathroom, the redesigned garden or the outdoor kitchen paled in comparison with the allure of the jaunt to foreign – not necessarily warmer – climes or the sexiness of the new car on the driveway?

To look at the trading update from Travis Perkins, our largest builders’ merchant, the answer is probably, yes. The merchant issued a warning a couple of weeks ago to the effect that profits are likely to be lower than forecast, though still a respectable £240m for the full year. The money markets acted accordingly, with TP shares heading in the vicinity of the first lockdown lowpoint.

It’s not just the RMI market that is stuttering a little. The update says: “Volumes in both the new build housing and private domestic RMI markets continue to be impacted by higher interest rates and weaker consumer confidence driven by persistent, higher than anticipated consumer price inflation.”

New house building is, according to analysis by the Home Builders Federation, likely to fall to its lowest level since the second world war. We’ve heard that statistic a lot over the past 15 years, since the global financial crash of 2008 effectively turned the taps off UK housebuilding almost overnight. Since then there have been a great many schemes designed to improve matters, none of which solved the problem outright.

It’s not surprising that homeowners are running shy of the huge spend on their properties that we saw during 2020-2021. For a start, we’re not confined to barracks by the pandemic, so no longer do we have swathes of people looking at the wobbly paving slab in the garden and deciding that finally, they were going to do something about it. Then there’s the fact that a great many of us with gardens probably only have room in them for one shed/garden-office and/or one outdoor-kitchen/posh barbeque area. When ’tis done, so to speak, ’tis done.

However, more pertinent is the whole cost of living scenario. Food bills, energy bills, water bills, mortgage payments: they are all way, way higher than they were three years ago. Those sorts of rises make a serious dent in one’s ability to spend on essentials, or even saving for the proverbial a rainy day, let alone non-essentials. Which, let’s face it, a lot of RM&I is. R- repair, that needs to be done. M – maintenance, that ought to be done but could be put off. I – improvement – doesn’t need to be done at all, and when times are tough, won’t be. I remember John Carter telling me that, explaining a previous profit warning that TP had issued.

The interest rate rises, which affect those people with mortgages, or those hoping to obtain one and get on the housing ladder, are eventually going to feed into house prices, which in turn affect householder confidence – and in many cases actual ability – to spend money on their homes. So much of the activity in this sector of the industry is tied in with housing transaction levels, we know that. However, the idea that those who don’t move, improve, which has held the RMI sector in good stead during previous sticky economic times won’t hold water if householders can afford to do neither.

It’s not all totally doom and gloom though. The TP update also suggests that, so far there is a more resilient performance across other sectors, namely commercial, industrial, infrastructure and public sector housing – and Toolstation continues to perform in line with expectations both in the UK and Europe.

The last time I popped into Toolstation and its brother-from-another-mother rival Screwfix (for some reason the only places I can buy the right lightbulbs for some of my lamps) they were heaving. So, there is plenty of work being done by some people somewhere. For now, anyway. It just means that merchants – national, independent and the inbetweeners – are going to have to work hard to make sure they get their share of it. Work harder and smarter.

Radio-silence for the next two weeks while I’m on annual leave. Bye!


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About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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