The first half of this year has certainly been an eventful one. I’m sure as we all entered 2024 we hoped for something much calmer and stable than 2023. We got the exact opposite.
Big names at various levels of the supply chain departed us. Demand flip-flopped from positive to negative. Politics played its part and the General Election which took place just at the start of H1 capped a torrid six months for fenestration.
As the summer holidays approach, it’s time to take a look at what might be in store for us in H2 of this year.
Where will demand go?
Usually, when a new party enters power there is a bit of a bounce in the economy. But, in the days and weeks following Labour’s win, I am not seeing that bounce, at least not yet. Also, the election came at an inconvenient time for the sector. June was entirely taken up by the campaign, sucking the oxygen out of the room and diverting the attention of the public. The winner was announced on July 5th, but with the school holidays coming up only two weeks after, which is one of the sector’s quietest periods historically, it means we are going from one quiet period into another.
Families up and down the country are now making their way around the country or abroad on their holidays, delaying any major purchasing decisions for at least the next few weeks. The reality is that any tangible recovery in demand isn’t going to come until at least the end of August or early September.
The good news is that from early September the usual pre-Christmas rush (yeah, we’re already nearly there) should begin. Those last two months of the year where people rush to get their home improvement projects done before the worst of the weather sets in and Christmas comes. But in the meantime, summer could be leaner than we’d like it to be.
More bankruptcies?
The first half of this year is going to be remembered for the sheer number of bankruptcies our sector was hit with. We sadly lost a lot of well known names in the installation and manufacturing parts of the supply chain. A mix of higher costs and lower demand hit our sector hard.
Unless there is a fundamental shift in the general performance of the economy in the coming months then the difficult trading conditions are going to continue. It will mean we will still likely see a higher rate of industry failures, which will result is lost jobs and unpaid bills.
As an aside to that, it’s worth noting that finding industry business insurance to underwrite credit is becoming more and more difficult. Due to the high failure rates, underwriters are increasingly staying away from our sector, which is proving to be a problem for companies who are trying to underwrite credit accounts with their customers. If credit is becoming more difficult to facilitate, and poor credit ratings are giving more red flags to potential suppliers, then the industry could find things becoming ever more difficult.
Housing boost?
One of the major pillars of Labour’s plan for the country is house-building. As I explored in an article recently, the fenestration sector would gain significantly if Labour were able to get their 1.5m house-building plan off the ground.
However, they face a number of challenges, the primary being the chronic lack of skilled workers to actually make their targets a tangible possibility. But, if they can somehow solve a problem that has plagued our industry and others for the best part of 15 years or more, then they have a genuine chance of getting more homes built.
What we may see, if Labour can start making some headway, is a boost towards the end of this year for new home starts. More new homes being built means more windows and doors. Not only that, more homes in the supply chain will allow people to move home more easily, and when people move they spend on home improvements. Another boost for our sector.
Inflation vs interest rates
Inflation is now back to the 2% target. Way down from the double-digit highs from 18 months ago that saw spiralling costs in all parts of the economy, including the fenestration sector supply chain. As a result, the Bank of England upped interest rates for a prolonged period in order to bring inflation back down. Whilst it finally worked, it has meant millions more are paying significantly more on their mortgages, loans and credit cards.
However, now that inflation is down and looks set to hover around that mark, there is going to be pressure on the BoE to lower interest rates. It is looking likely that August or September will see a rate cut, with perhaps another before the end of the year. This will provide a boost to the economy and lower the pressure slightly on homeowners and families.
I am hoping that the prospect of lower interest rates will provide a bit of a boost to consumer confidence and spending. The era of nearly zero rates is long behind us. We are highly unlikely to see that again for a very long time. But even if rates were to be cut just a few times from where they are now, that would be enough to provide a boost.
Overall, H2 is going to be a mix of opportunity and difficulty. It is going to require careful navigation by our sector if we are to make it to the end of the year with as little damage as possible.
As always, there are opportunities to be found if we work hard enough, for example in the aluminium sector as well as flush windows and even smart tech. But it won’t be easy and we’ll all need to work very hard to keep our heads above water.
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