Renegade Conservatory Guy

I thought I’d put in words why I feel we’re in a unique position right now which is unlike any other time I’ve experienced running a uPVC window and conservatory company.

We’re at a turning point where I believe that well positioned, financially sound, forward thinking companies in our industry are in a great position to strengthen their position, grow sales and make profits in the coming years. I’m focussing my thoughts on installation companies and fabricators in the residential uPVC sector, although my thinking can also apply to associated companies.

1. Downturn levelling out for uPVC industry

Over the last two years the market for uPVC windows, doors and conservatories has contracted dramatically. In fact, since 2003/2004 our industry has been in continual decline.

The latest research suggests that this downward trend will continue in 2010, but at a far slower rate, levelling off in 2011 and maybe even growth returning in 2012. For any company that has maintained sales, or even grown their sales, during a time when the market has been shrinking so dramatically, will find a levelling off period feel like a real growth spurt. Imagine your company has grown sales over the last two years at 5% per year, when the market as a whole has declined 20% each year. If the market stabilises, then such a company would find 25% growth reasonably easy by comparison.

2. End of Recession

The UK has been in recession for 6 consecutive quarters. The Bank of England has recently pumped a further £25bn into the economy to help bring us out of recession. France and Germany exited recession in the second quarter, and the US came out of recession in the third quarter. It was a surprise that the UK did not return to growth in the third quarter, so it seems likely that the UK will follow the other major economies in Q4.

I appreciate that it may seem tough right now, but with the media now talking about recovery, rather than talking about recession (or even depression) then I feel that gradually confidence will return. People buy our products when they feel confident about the future, particularly conservatories. As people start to feel more confident about the economy and their own position in it, then they are more likely to choose to purchase big ticket items.

3. Housing market picking up

The latest surveys from the Halifax and the Nationwide suggest that house prices have virtually recovered to the rates they were at 12 months ago.

I appreciate many experts are talking about houses prices going back down, but with fewer houses being built over the last few years, and the population increasing, there’s still an undersupply of housing.

I believe that we’ve seen the end of house price declines, and although we may not see growth like we have in the past, we will see growth nevertheless. Our industry relies on the movements in the housing market. As people move home, they either make improvements to increase their chances of a sale, or they make improvements to their new home after they’ve purchased.

The Home Information Packs will have improved demand for energy efficient windows and doors, and as more houses are bought and sold, then demand for windows and doors will increase.

Also, as house prices increase, then conservatories become a more sensible investment. As house prices are falling, then consumers could look unfavourably upon making investments in further extensions to their home. But, as house prices increase then people will feel more confident that a conservatory is a more sensible investment.

4. Mortgages / Interest Rates

People on variable rate mortgages have never had it so good. Even though you could argue that the banks are taking advantage of the low interest rates, and not passing the rates on to mortgages, I still feel that mortgage rates are at very low levels compared to recent history.

If the banks free up more capital, and relax their lending policy and if the interest rates stay at 0.5% for a sustained period then more mortgages will be granted. This will have a positive effect on house prices, and encourage people to remortgage to fund home improvements.

5. Lots of weaker competitors have disappeared

Although the number of fabricators and installers ceasing to trade so far in this recession has been lower than many people thought, I have certainly seen a number of my competitors go bust.

I have noticed that mostly the less professional, low price retailers have struggled and disappeared. Sure, many of these companies have phoenixed but often in a smaller way which will have less impact on the more professional survivors.

Now is a time to take market share!

6. Global warming / Climate Change

Whether you believe global warming and climate change is happening, I hate to say that this potential catastrophe is a short term opportunity for window companies.

Some installers are taking this opportunity by the horns and successfully promoting energy efficient windows in a big way. With carbon emissions high on the global agenda and the current high cost of fuel, we are all looking for ways to make our homes more energy efficient. The more the industry gets together and pushes the energy saving message and lower fuel bills, then the more windows we will all sell.

7. Government Intervention

If the world is to fully tackle climate change, then Government intervention has to happen at some point.

In November 2008, the Government passed the Climate Change Act which set a legally binding target for the United Kingdom to reduce greenhouse gas, emissions by 80% compared to 1990 levels by 2050, with an interim target of 26% by 2020 (which has subsequently been increased to 34%).

Transport consistently grabs the headlines on climate change emissions but buildings pour out about half of the UK’s CO2 – 30% from homes, 20% from commercial buildings.

It is generally recognised that if you live in a single glazed house and install Energy Efficient Windows you could reduce the energy you use by 0.30 tonnes (or 18%) per year. The Government cannot just assume consumers will take the decision to install the latest in energy rated windows, or loft insulation, or any other energy saving product.

Government intervention has to happen at some point, whether through reduced VAT, a window scrappage scheme, grants or creating legal requirements for upgrading our homes, and when this happens our industry will be well positioned to benefit.

8. Timber Too Expensive

We can argue all day long about the environmental credentials of both PVC-U and timber windows. There are strong opinions from both sides.

But, one thing cannot be argued about. Good quality timber windows are out of the financial reach of the vast majority of homeowners. Whereas good quality uPVC windows are very affordable. This isn’t going to change, and with more foil options, better hardware, and more energy efficient uPVC options available, I believe that uPVC is ready to fight back!

Save a tree, buy uPVC!

9. Replacing the Replacements

It doesn’t take a genius to point out that most houses now have uPVC windows these days – just drive down most housing estates in the UK and it’s perfectly clear.

The challenge now is to ‘replace the replacements’ and I believe this emerging market is gathering pace. Conservatory Outlet now sends all post consumer replacement uPVC windows off for recycling, and the numbers of frames we’re getting back from dealers is amazing (100-200 frames per week). Lister trade Frames recently pointed out that consumers are replacing relatively recent uPVC installations, so they can benefit from better designs and more energy efficient windows.

Let’s face it, many of the uPVC windows and doors installed in the 1980’s and 1990’s was badly sold. As installation companies start replacing more uPVC windows, then the natural spirit of ‘Keeping Up With The Jones’ will gather pace.

10. Still a very big market!

Finally, I just want to point out that despite the fact that the double glazing and conservatory market has shrunk dramatically, it’s still a very, very big industry.

There’s loads of profitable work out there to be had.

You just need to know how to find it!