Building material sales on course to bounce back after initial downturn

Midlands-based trade body the Builders Merchants Federation (BMF) has forecast a drop in growth this year in its Winter 2023 Forecast Report.

Despite the political and economic upheaval seen in 2022, the year is expected to end with positive growth of 6.7% due to price inflation rather than increased sales volume.

But ongoing volatility and uncertainty in 2023, combined with an anticipated dip in inflation, has prompted the BMF to forecast a downturn of -1.6% at the end of this year, compared with 2022.

Growth is then expected to pick up later in 2023, with the forecast predicting a bounce back in 2024, with an average growth forecast at 2.1%.

BMF Industry Analyst and Economist, Thomas Lowe said: “Persistent price inflation throughout 2022 caused a roller coaster of monthly growth for builders’ merchants.

“Unfortunately, that growth was a by-product of price hikes rather than units sold.

The cost of living crisis is expected to last through 2023 and the pressure of inflation is still evident.

“Providing that the Spring Statement from the Chancellor does not drastically change the picture, we anticipate dipping into negative growth in 2023 before the market begins to recover in 2024.”

Based in Coventry, the BMF represents a significant slice of the UK economy, with 870 merchant and supplier companies who together have combined sales of over £42bn and employ over 230,000 people in the building materials industry.

The 36-page BMF Forecast Report combines a comprehensive analysis of merchant market performance from July 2014 to November 2022, taken from the Builders Merchants Building Index (BMBI), coupled with analysis of key factors affecting builders’ merchants’ sales to project future sales in 2023.

Thomas Lowe added: “Price Inflation stemming from the Ukraine / Russia crisis continues to act as a double edged sword, as volume growth sees declines whilst the increase in prices keep the market afloat.

“Despite government and monetary policy being implemented to help offset the wider inflation picture via reduction in spending policies, the time for policy to take an impact is lengthy.

“With much-needed financial aid policies to help offset the continued raising costs of living and therefore stimulate an influx in spending within the repair, maintenance and improvement market, it could take longer than anticipated to bring prices down and stabilise the market despite signs of price slowdown in some BMBI categories.

“Thus price inflation is likely to be a continuing issue acting as a ‘double edge sword’ throughout the rest of 2023.”

John Newcomb, BMF CEO added: “With so much volatility surrounding the general economic picture there is considerable uncertainty forecasting demand for core markets such as domestic repair, maintenance and improvement work and housing, where higher mortgage rates and the end of the Help to Buy scheme are expected to slow new sales.

“Other areas of construction, however, continue to see strong demand, particularly for industrial, commercial, infrastructure and government projects.”