Storm clouds ahead

There was no possibility of taking a walk that day… the cold winter wind had brought with it clouds so sombre, and a rain so penetrating, that further out-door exercise was now out of the question.

Wow, it’s a bit grim out there. For once, I’m not just talking about the quixotic Summer weather patterns.

Travis Perkins have released first-half figures which show revenues down 2.5% and adjusted profits sliding 31%. Ibstock today announced revenues down 13% and pre-tax profits down 40% for the same period. Marshalls, in a similar vein, saw sales down 13% and profits 26% down, again for the first six months of the year.

Both the last two have, on the back of this, made the decision to close a factory. In Ibstock’s case, this is the Ravenhead site in Lancashire, while Marshalls are shutting the Carluke factory in Lanarkshire. No-one makes such a decision lightly. Factories are huge beasts, full of expensive capital equipment, and people who depend upon those factories for their livelihoods. They are also hugely expensive to run on a daily basis, especially with the cost of energy. The papers can be as full as they like of the domestic energy price cap and wholesale gas price reductions, but those don’t benefit businesses that have had to forward-buy their energy at commercial rates.

So, it costs a lot to run these factories, and it also costs a lot to close them – Ibstock are setting aside £10m to cover it all – and you don’t re-open them on a whim. There isn’t a switch you can flick to turn a couple of brick kilns and a packaging plant back on.

Why are we at this stage? Because people are buying fewer building materials in the simple answer. There’s a cost-of-living crisis, householders’ domestic bills are double, treble, even quadruple what they were two years ago. Taxes are up. Inflation is 10%, a rate that was unthinkable at the beginning of this decade. It’s come down, certainly, from it’s October 2022 high, but that only, of course means that things are getting more expensive more slowly, not that they are getting cheaper.
The cost of fuel too is creeping back up. One of the things that I reckon marks you out as a proper grown-up is when you notice things like petrol pump prices in different parts of the country.

All of this means that the RMI market is taking a hit. Who wants to commit to a huge spend on an extension, a new conservatory or re-doing the patio when you’re really not sure if you can afford it? All these extra costs are affecting businesses as much as households of course, plus there’s wage inflation which has fed into the wider picture.

Is there an argument that all this is just the economy trying to find some balance after the hectic boomtimes of the Covid lockdowns? When people stuck at home were desperate to do something, and doing something to improve their surroundings seemed like a good idea. Did we get five years’ worth of patio and fencing work crammed into two years because of Covid? Possibly, except the issue is, of course, much more complicated that that. The war in Ukraine has added another level of complications that we could really do without.

Is this it now? Is this as good as it’s going to get for a while? Or are there pockets out there that are quietly getting on with business and doing nicely out of it? The ting about large plc companies like the three mentioned above is that they have to put their heads above the parapet; the City and shareholders require that they, and the rest of us, are kept informed. There are plenty of independent merchants whose 2022 results show some really quite pleasing increases. Whether they can maintain those for this year will only become public when their full year results are out.

In any case, judging by the weather forecast this morning, anyone selling fencing panels anywhere in the UK is likely to be pretty busy over the next couple of weeks.

Just popped out for a Summer stroll…..


About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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