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Builders' Merchants Market Report 2008
Key Note Publications Ltd, Nov 2008, Pages: 94
The UK market for builders' merchants was worth an estimated £12.86bn in 2007, having increased in value by 4% on the previous year.
Builders' merchants provide a key service to the UK construction industry by stocking a vast range of materials, products and tools, which can be classified into three broad categories: heavyside materials, such as bricks, cement, concrete building blocks, gravel, roofing tiles and sand; lightside materials, such as electrical wiring accessories, floor and wall tiles, heating/plumbing equipment, ironmongery, nails and other fixings, and paints and other decorating materials; and tools/tool hire, including power drills, generators, hand and power tools and pumps. Building contractors are their main customers, although DIY enthusiasts are also served by them.
The market is undergoing a period of consolidation, with large companies acquiring smaller merchants in order to cover specific geographical areas or to acquire particular specialisations. As a result of acquisition, some by foreign companies, there is a `super league' of builders' merchants, each with several hundred branches, the smallest of which is very much larger than the next nearest competitor. The range of products stocked by builders' merchants is so large that it competes with various other types of company, including DIY stores, electrical wholesalers and timber merchants.
Among the most important issues facing the builders' merchants market are Building Regulations, sustainability, recycling and costs. Ongoing modifications to the Building Regulations mean changes in building materials, components and work practices in the construction industry. Improvements in energy conservation, fire safety and electrical safety are examples of areas in which builders' merchants must offer up-to-date advice and stock relevant products. As the concept of sustainable construction has gained in importance, builders' merchants are increasing their product ranges and expertise in areas such as renewable energy and water conservation, as well as waste reduction, re-use and recycling. Rising energy and material costs are increasing the cost of operation for builders' merchants. The vast range of materials and products stocked by them requires huge funds to hold such large inventories, and high road-fuel costs are having an impact on transportation costs.
Turmoil in global financial markets makes the future for the construction industry, including builders' merchants, uncertain. Difficulties in the subprime mortgage market in the US have had a knock-on effect on the banking sector worldwide. In the UK, some banks with a heavy involvement in the mortgage market have been rescued by nationalisation or takeover by other banks. Banks have become reluctant to lend money and their terms for lending are becoming more restrictive. This has led to a steep downturn in the UK construction industry, particularly the housebuilding sector. The number of new starts has dropped and there has been a dramatic fall in the number of mortgage approvals and housing transactions. A consequent fall in the builders' merchants market is to be expected, but to what extent will be difficult to assess until there is greater confidence and stability in financial markets.
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