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BMF highlights CPA forecast gloom

The BMF have expressed concern at the low levels of housing and RMI output forecast by the CPA.
The Builders Merchants Federation are echoing the unease of the Construction Products Association (CPA), who yesterday took the extraordinary step of re-calling and re-issuing their five year construction industry forecasts in the light of the credit crunch.

BMF managing director Chris Pateman says that the forecasts for a weak housing RMI sector are “a matter of great concern”.

“Conventional wisdom in a tight housing market is that people don’t move, they improve. But not this time, by the look of things. Most merchants have been anticipating similar levels of activity to last year, but it’s worrying to see a projected 4% decline on what are already pretty depressed trading levels in 2009, as the effects of the credit crunch feed into consumer disposable income,” he says.

“It comes as no great surprise to see new house building projected to slump this year: we knew from first quarter brick and block sales that the sector was in decline – although -20% is a shocking figure to see put down in black and white! Of course, if house builders were willing to work on the kind of margins they expect from their suppliers, we’d all be building like there’s no tomorrow.

Pateman points out, however, that the CPA forecasts are based on constant prices. “But merchants are currently experiencing input price inflation in the cost of building materials in excess of 7%, and that’s before we factor in the huge increases in the cost of fuel which are hitting every aspect of the business. As an industry, merchants have always worked with their trade customers to mitigate the effects of price increases and to provide deliveries to site either free of charge or at well below cost. We are now at a point where merchants can neither afford to absorb price increases nor to subsidise the cost of delivery. And the government’s threatened 2p per litre increase on diesel fuel duty sends entirely the wrong signal at entirely the wrong time.

“The government can say we’re all at the mercy of global market forces, but the UK rate of diesel fuel duty – which is already twice the EU average – is one thing which is firmly in this government’s hands, and which would have an immediate and positive effect on inflation at a time when the whole industry’s margins are stretched. That’s why we have already written to the Chancellor suggesting the movement of building materials ought to receive a similar rebate of diesel fuel duty to that given to the bus sector.”

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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