The latest Forecast Report from the Builders Merchants Federation (BMF) (Spring 2023) reflects the continuing impact of rising interest rates and the cost of living crisis on building material sales, maintaining the trend of economic uncertainty.
The first quarter of the year saw a negative return for builders’ merchants’ sales, at -2.3%. However, this figure understates the fall in sales volumes, as it includes an element of value growth coming from materials price increases.
While Repair Maintenance and Improvement (RMI) work is performing better than housebuilding, ever-rising interest rates are causing further strain on disposable incomes, demand in the RMI sector is similar to pre-pandemic levels, with potential to see further declines. The new homes market is further affected by the end of the Help to Buy scheme, with new home registrations down on 2022.
Given this scenario, the BMF’s baseline forecast now predicts negative growth of -1.4% in 2023 over 2022. While this is slightly ahead of the BMF’s previous 2023 forecast (-1.6%) there is less optimism for market recovery in 2024. The current prediction puts average growth forecast at +1.3%, whereas the previous forecast was more positive at +2.4%.
Thomas Lowe, BMF industry analyst/economist, commented: “Much depends on the effectiveness of the Bank of England’s strategy to bring down inflation. If we start to see signs of economic stabilisation, we expect the market to pick up in the latter months of this year and continue to slowly improve into 2024. We are, of course, keeping a watchful eye for any change in conditions that may affect the forecast for 2024.”