Joinery business gathers pace

Talk to most joinery manufacturers and woodworking firms this summer and they'll tell you they are working flat out to meet market demand.

According to the most recent State of Trade survey by the British Woodworking Federation (BWF), its members saw the increase in joinery sales volumes at the start of the year and the pace has quickened ever since.

"Anecdotal evidence from the end of the first quarter indicated that workshops were becoming busier and had been dealing with pent-up demand after a slow start to the year when we were hit by the appalling weather and flooding through January and February," said BWF chief executive Iain McIlwee. "Now we see a real upturn reflected in the figures and confidence growing."

In fact, BWF members are reporting the highest sales volumes increase on balance since the survey began in 2012, and the highest percentage of manufacturers with order books stretching past one month. It is also encouraging to see more than half of respondents operating at over 80% capacity for the first time since the last quarter of 2012.

However, the upturn has brought its own problems. One of the biggest is the need to recruit more workers at short notice. And after nearly six years of falling real wages, rises in UK weekly earnings have finally caught up with inflation. These additional factors are reflected in the survey results, with almost two-thirds of respondents reporting increased labour costs over the past year and a quarter now listing labour availability as a constraining factor.

Iain McIlwee points out that, of the 2.9 million people employed by the construction industry in the UK, 7% are carpenters and joiners, making woodworking the third largest sector of employment in construction

The joinery industry also traditionally has the highest ratio of apprenticeships in the specialist construction sector - another reason why the BWF is lobbying hard to get the government to widen the eligibility of full-funded apprenticeships to all age groups, not just 16 to 18-year-olds, as well as improvements to the way that funding is channelled into the industry.

Another issue highlighted by the upturn is cash flow. Slow payment by customers is particularly damaging. As one BWF member said earlier this year: "Our financial situation recently has been the most difficult it has ever been with payment terms stretched beyond due dates, contractors withholding payments, clients unable to pay months past the end of the job, and contractors asking for discounts which have been given to win the work. We've had to increase prices and get much more choosy about which contracts we take on, even down to not wasting the costs of pricing jobs that won't be profitable or we are not likely to win."

Consequently, the industry is firmly behind the National Specialist Contractors Council (NSCC) Fair Payment Campaign, and the BWF is encouraging government to work closely with the NSCC on this issue.

"We welcome the introduction of the Supply Chain Payment Charter through the Industrial Strategy, but it needs to be enforced effectively," said Mr McIlwee. "Failure to comply should be met with real consequences. In our opinion, any contractor that does not apply the principles of fair payment should not be eligible for any public sector contracts."

Nonetheless, manufacturers remain confident that sales volumes will continue to improve this quarter, with a balance of 56% predicting an increase in Q3 2014, and a balance of 64% predicting an increase over the next year. Reflecting this increasing confidence, almost half of all respondents to the BWF survey indicated they were planning to boost their investment further in manufacturing equipment and product improvements. This investment is critical and will help to improve efficiency in the sector.

The results of the BWF's survey complement those of the latest CPA Construction Trade Survey, which shows increased activity across all areas of construction, including for building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.

Private new housing was the key driver of a more buoyant construction market. This is particularly good news for the joinery industry, as private housing remains the single most important market for BWF members, with 60% supplying into this sector.

Commenting on the CPA's survey, Dr Noble Francis, economics director at the Construction Products Association, notes that many of the problems seen in joinery are reflected again among contractors and housebuilders.

"Many major contractors are still working on projects won in 2013 at relatively low prices but have been suffering from the key concerns of rising costs and skills availability, especially in specific sectors such as private new housing," he said. "Overall, 80% of building contractors reported, on balance, that costs rose over the past year; 95% reported that materials costs rose over the past year and 75% reported that labour costs rose over the past year. In terms of skills, 47% of building contractors reported that bricklayers and carpenters were difficult to recruit."

Mr McIlwee said the BWF was looking to government for measures to support a £3.8bn industry operating at the heart of UK manufacturing. "While we have large groups and global players in the joinery industry, the vast majority of the 5,070 active companies are SMEs," he said. "We've emerged from the recession, but there remains so much uncertainty in the UK with the election on the horizon and the devolution debate still hot. The European and wider global picture is also changing.

"BWF members supply products into almost every major construction project and we need long-term policy support and a clear focus on the cost of doing business for UK manufacturers of timber products or risk the full reward of construction growth to the wider economy being lost."