Data released today confirmed that the UK is undergoing a rapidly increasing squeeze on the cost of living, with inflation surging to 4.2% in the month of October compared to the same period last year. That is the highest in a decade and will put further pressure on the Bank of England to raise interest rates to attempt to cool rising prices.
From the point of view of the fenestration sector, this is going to have to become a major factor to consider in the months ahead.
Inflation higher than forecast
Families and the general public have been feeling the higher costs for a while. To many of us, the fact that inflation is now 4.2% is no surprise. We have all been feeling the pressure of higher costs for a while. It has just taken official figures some time to catch up.
To put it into context, this is one of the biggest month-on-month rises ever. The official prediction was for inflation to rise to 3.9%. Today’s figures beat that comfortably. The Bank of England has said inflation could reach 5% early next year. If we have another rise of similar proportions next month, we’ll have beaten that estimate. Throughout this year the Bank of England and many economists have been way behind the curve on inflation. For anyone who works in any major part of the economy, including UK fenestration, they could have told you what was going to happen with inflation. The argument that this was all transitory and would go away soon now looks like a joke. Perhaps those making forecasts need to speak more to people on the ground so they understand the actual conditions within the economy better.
Gas, electricity, diesel and petrol have all spiked hard over the last couple of months and makes up a large part of the latest rise in inflation. Unfortunately, these are all areas that cause prices to rise in most other parts of the economy. In UK fenestration, we have been seeing the price of resin, PVCu and aluminium profile, hardware, glass and many other products rise significantly and constantly all year. The construction says their costs have risen around 40% in a year. I would estimate that this would be at least the same for fenestration.
There are no signs that inflation is set to level off any time soon. I suspect we’ll be hitting 5% by December, maybe even next month. Wages are not rising as fast which means money is being taken out of people’s pockets which could otherwise have been spent on something else.
A cause for concern
The UK fenestration sector has to look at inflation from both sides. First, the supply chain. Costs have risen all year, making new windows and doors significantly more expensive than they were in 2019. There is only so far it can go before potential buyers rethink whether they can afford to upgrade their old windows and doors. There will be a ceiling at some point, and I believe we’re about to hit it.
Second is the effect inflation is having on the rest of the economy and population. There is a genuine cost-of-living squeeze happening right now and poorer and middle-income families are going to be hit with high fuel bills, gas and electricity, food, clothes and many other items. Inflation is going to add further pressure to strained finances. Remember that the money buffer that built up during the existence of the furlough scheme will not last forever, and for some people that buffer will now have gone. In the face of ensuring families are fed and kept warm, home improvement projects and other big-ticket purchases will be put on the back burner until things are calmer.
UK fenestration has to take inflation as a serious issue. Both because of its effects on the industry specifically, and what it will do to the economy as a whole. It means we have to start being proactive now about staying relevant in people’s minds. We need to be active in front of the public to keep letting them know that investing in their homes, upgrading their windows and doors is still a worthwhile investment in the long term, will be better for their energy bills and indeed the climate.
There are still lots of good reasons to upgrade your home right now, but we have to cut through the noise rising inflation is going to make over the next few months and ensure any damage done is kept to a minimum.
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