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BDA REJECTS NOTION THAT THE BRICK INDUSTRY IS IN CRISIS
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The Brick Development Association, the body that represents the clay brick and paver industries in the United Kingdom and Ireland, has responded to recent comment about the state of the construction industry, citing that the positive growth over the last month is something that manufacturers have strategies and plans to manage.
In light of recent Government initiatives, and particularly in regards to the ‘Help to Buy’ scheme, and the ‘Get Britain Building Campaign’, the new build sector has very recently gained significant momentum. In combination with the recent good weather, the National House Building Council has reported that housing starts have risen by 18% for the three months leading up to May; equating to a 7% year on year market increase for brick manufacturing.
The effect of this increase in demand has been to revitalise the industry, and despite this sudden acceleration, the BDA is confident that manufacturers and merchants will be able to meet this demand.
Alan Baxter, Chairman of the BDA, commented:
“Undoubtedly, the initial successes of schemes such as Help to Buy and indeed the growing pace of the economic recovery, has meant that the construction industry in particular has faced an upswing in demand. However, there is absolutely no suggestion that manufacturers of clay bricks and pavers will be unable to deal with the increased demand.
The reality is that the market for bricks has declined by 5% last year and is still around 35% below 2007. Manufacturers have reduced production to adjust to the reduced demand levels experienced since 2008, with a few plants being closed and some being mothballed. They have also extended year end shutdowns extending into January and February each year to reduce production still further whilst also maintaining their brick ranges for their customers.
It is the sudden change in demand profile that has caused pressures on the manufacturers. This has arisen for a number of reasons, but a significant one has been the surprising announcement of the Help to Buy scheme in the March budget and its immediate obvious success. Increased demand for new homes has not only caused builders to want to increase output but also to catch up on production lost during the poor weather in the first quarter. In addition, Builders Merchants have sought to increase their brick stocks to more normal levels as they too have experience increased demand. Furthermore, brick customers have become accustomed to large stocks and therefore immediate availability since 2008.They now need to return to planning their deliveries and placing orders in advance as was standard practice prior to 2008 and the credit crisis.
These circumstances have all combined to create a period of very strong demand that the industry is responding to, but it will require some time to adjust.
Clearly production capacity that was lost due to extended Christmas shutdowns in the first months of 2013 cannot now be recovered, but as demand settles down over coming months into a more normal pattern, the industry will be more than able to cope. The brick market in 2013 is expected to grow between 10-15% compared to 2012 so given a more normal demand curve it has more than enough capacity to cope with any likely increases in demand. If demand continues to grow, UK manufacturers will wish to continue to bring back mothballed capacity and invest in new capacity as long as selling price levels are sufficient to justify such investments. Whist house prices increased fourfold since the mid-eighties, brick prices are at the same absolute level as twenty five years ago.
What we have seen over the last few months is simply the industry adapting to a much needed uplift in activity – which is a really positive development! From the perspective of manufacturers, the challenge moving forward is to work closely with customers as a means of effectively forecasting demand.
Brick buildings are an extremely durable and sustainable material, lasting for at least 150 years, providing a great built environment and beautifully designed buildings brought to us all, by an array of highly skilled and trained individuals, such as builders, planners, and architects. At the BDA, we are extremely proud of the way the manufacturers have responded to the market in such difficult times, especially in the downturn of the last few years. We will continue to show progress, improved efficiency and innovation in the future”.
Mr Baxter also cautioned about the issues being faced by manufacturers wishing to invest to increase their capacity. “Energy costs can be up to 35% of production costs. With increasing climate-related levys we will have to see higher brick selling prices in the future if we are to have a viable brick industry. The challenge will be to remain internationally competitive with the additional UK specific climate-related cost burdens. For manufacturers wishing to build new factories it is not helpful that new carbon allowances are not available initially, and it is only after investment that the manufacturer can apply to the new entrants reserve for an allocation, which may or may not be successful. This policy is not conducive to supporting the industry to invest in new capacity and reduce emissions.”
