Dramatic action by the government and Bank of England to halt the slide in the UK economy has given some comfort to the timber trade, but the jury is still out on whether the action is enough to restore confidence.
A 0.5% cut in the Bank of England base rate announced on Wednesday, coupled with a £50bn rescue package and part nationalisation of UK banks represents one of the single most major interventions in recent UK economic history.
“With any move the government can make there is the boost to the economy and confidence levels, which has got to help, said Sonae UK’s Tony Hackney. “The timber industry’s business in general is down by about 30% and it’s very difficult for all of us, so we welcome the government’s move. Banks are the backbone for future investment in this industry.”
“An interest rate cut has got to be good for everybody,” agreed PT Agencies’ Mike Harrod. “But I think the UK government needs to look at why interest rates are higher here than in Continental Europe and the US. Even with a base rate of 4.5%, UK businesses still have to pay a lot more for their money than their European counterparts.”
He predicted tough times for timber importers relying largely on borrowed money, with merchanting giants like Travis Perkins and Jewson likely to take bigger market shares in the future.
Tony Miles, managing director of International Timber, said the interest rate cut may prevent the economic situation from getting too much deeper.
“The government needs to give a boost to the building market and give some security. I’d like it to bottom the market out now and a cut in interest rates will help that. People like first time buyers are scared of negative equity. They could buy a house for £200,000 and in six months time it’s worth £150,000. If the government could cover that £50,000 negative equity risk for the next two years and somehow bridge that gap we would have a return to more normal market conditions.”
“Obviously addressing the financial and lending markets issues is fundamental to secure confidence to house buy once more,” said Stewart Dalgarno, chairman of the the UK Timber Frame Association. “Any assistance to stabilise and access mortgage markets is paramount.” He said new subsidies were needed to bolster housing construction until lending confidence returned.”
“The impact of the credit crunch is getting deeper,” said Jim Peryer, managing director of Snows Timber. “It seems to be accelerating in pace and affecting other areas outside of housebuilding. If business levels continue as they are I think we will see a big shake up in the industry. It won’t be consolidation as no-one can get their hands on the money but I’ll think we’ll see people leaving.
“There’s still work out there but we do need the government to deliver on its Comprehensive Spending Plans, said Simon Storer – communications and external affairs director at the Construction Products Association.
“When there’s pressure on the economy the last thing we need is for the government to pull public spending.
“There are also concerns about what a new government will do. Whether it’s a new Labour government or a Tory one, it will reassess things in 2010. Where one has concerns is that they will scrap the targets that the government is currently working towards.”
