As business prospects become sharply bleaker, it is clear that hardly any significant markets for timber or wood products will escape fallout from the economic crisis.
News of steeply lower profits from two major housebuilders confirm that the property slump had begun to bite hard even before the latest City ructions and collapse of new mortgage lending. Sales dropped by 22% at Redrow in the year to the end of June and, with the value of its land bank down £260m, it made an annual loss of nearly £194m. Over the same period Barratt Developments saw a 68% fall in pre-tax profits.
Direct evidence of the downturn in demand comes in the official estimate of construction output in the second quarter of 2008. It indicates that the total volume, including repair and maintenance and adjusted for seasonal variations, was 0.5% lower than in the first quarter. New private housing work was 7% lower over the same period. The total of all new work was down 3%, but maintenance and repair work rose by 2% between the first and second quarters.
Demand for timber
Looking ahead to the level of potential demand for timber and wood products, government data suggest that orders placed in the construction industry for all new work fell by 8% between the first and second quarters. But total orders rose by 7% between June and July, boosted by increases for commercial projects and public-sector work.
The volume of orders for private-sector housing fell 13% between the first and second quarters and dropped by 14% between June and July. At the annual rate, orders plummeted by 49% in July. Separately, the CIPS construction purchasing managers’ index for August indicates a further sharp fall in activity, “with little appetite to invest in either raw materials or workers”.
Overseas trade figures for the second quarter reveal that total imports of wood and wood products fell nearly 10% compared with a year earlier, with sawn and planed timber down 20% and plywood and veneer sheets 5% lower. In contrast, imports of builders’ carpentry and joinery were 11% higher than a year ago, although exports were down 21% despite the favourable exchange rate. Overseas sales of sheet products by UK firms fell by 14% but wooden container exports held steady.
UK property market
The slump in the UK private property market continued into August, according to the Royal Institution of Chartered Surveyors, which says sales were the lowest since its monthly survey began in 1978. Further, the number of new enquiries from potential buyers fell again, and at a faster rate than in July, indicating that the market will continue to stagnate in the coming months.
In the high street, retailers are facing the worst conditions in three years, with sales falling in five of the last six months. That is the analysis by the British Retail Consortium, which says that DIY sales slowed in August, while big ticket furniture showed year-on-year falls for the seventh month in a row.
Official figures, which have recently tended to be more optimistic than business surveys, indicate that the volume of furniture sales in August was down by nearly 11%, while sales dropped in value by almost 6%. The CBI survey for September found that furniture retailers continued to suffer during the month.
On the supply side, output of furniture from British factories fell 0.2% between June and July but rose marginally at the annual rate. Manufacturing output overall fell for the fifth successive month – the longest sustained period of falling output for seven years – and was down 1.4% annually. However, annual factory gate price inflation eased to 9.7% in August, from 10.3% the month before, and input costs fell 2% on the month but remain nearly a third higher than a year ago.
