Continuing construction through COVID-19
Following national lockdown, when construction and manufacturing largely came to a halt, new figures now show that the industry is experiencing monthly growth.
The Office for National Statistics (ONS) reveals that monthly construction output grew by 17.6% in July 2020 – the second
largest growth since records began in 2010 and following record monthly growth of 23.5% in June this year. This marks the third consecutive month of growth since the record monthly decline of 40.2% in April 2020.
Although, the ONS reports that the level of construction output in July 2020 was 11.6% below the February 2020 pre-pandemic level.
In addition, builders merchants’ sales bounced back strongly between May and July 2020, increasing by 38.9% in value compared with February to April this year, according to the Builders Merchant Building Index (BMBI) report.
‘These sales figures demonstrate the resilience and strength of a V-shaped recovery in the sector,’ says Mike Rigby, Chief Executive of MRA Research which produces the monthly BMBI reports.
As major UK brick manufacturers report losses in sales and revenue in the first half of the year compared with last year, they also are seeing green shoots of recovery. According to Forterra, sales have returned to 90%, while Michelmersh says it has a robust forward order book for the second half of the year and Ibstock reports clay sales volumes at around 80% and concrete sales volumes at around 85% of the previous year.
Clay Technology speaks to industry professionals about the pressures of the pandemic and changes in the industry since the beginning of lockdown.
Laura Cohen, Chief Executive of the British Ceramic Confederation (BCC)
The ceramic manufacturing sector, like manufacturing as a whole, has been badly affected by the pandemic, mainly due to much-reduced customer demand in some sectors and the challenges of manufacturing during social distancing. The industry has relied heavily on government support, especially the Job Retention Scheme, and some businesses have taken loans to help them manage cash flow issues. However, like any other industry, how each company has fared has varied depending on factors such as size, sub-sector, financial resources and other variables. Most ceramic construction product sites have returned. While many sites are operating at near full capacity, others may have most, but not all, of their production lines on-site fully operational. A handful of older sites are mothballed or being closed permanently.
There has been heavily reduced demand from aircraft manufacturers and some car manufacturers. This has affected some manufacturers of technical ceramics. However, other technical ceramic demand and refractory product demand has remained high, for example, those companies supplying to healthcare, food and drink, defence, energy and electronics customers.
Specialist ceramic catering ware demand fell dramatically while the hospitality sector (e.g. restaurants and hotels) closed around the world. Demand is now returning, albeit at a lower than normal level. While some tableware and giftware sales were badly affected by loss of retail outlets, many companies have increased online sales dramatically, and in some companies, sales are now stronger than last year.
Through stepping up our dialogue with members, officials and politicians, BCC has continued to work hard to support our members in accessing all the help that is available to get them through these challenging times. We provided industry-specific guidance on working safely during Coronavirus and have seen some fantastic examples of businesses using this opportunity to review their health and safety procedures and make many improvements to ensure they are able to operate while keeping workers safe. We are also continuing to host regular video calls with government and member companies, which now cover Brexit as well as Coronavirus. This has created an even stronger solidarity in the sector and it’s been great to see government responding promptly to member concerns in many cases.
As the pandemic and Brexit uncertainty continues to take a toll, the next few months will be critical. To really help our industry, we need government to agree and ratify a trade deal with the EU by the end of the year, as 57% of our members’ exports are sent there. Those manufacturers who have been hardest hit are also telling us that they need further ongoing support to help them recover, and we continue to call on government to provide this in the weeks and months ahead. We appreciated that both the Chancellor and Leader of the Opposition have made time to visit member companies in the last few weeks to explore these issues further and welcomed the measures put in place in the Winter Economy Plan.
Andy Carp, Director, Resource UK and Chairman of IOM3 International Clay Technology Association (ICTa)
COVID-19 has had a severe impact on the heavy clay industry as it has almost all manufacturing sectors, but this would appear to have been short-term at the time of writing. Key impacts have been the greatly reduced output for Q2, the substantial numbers of the workforce placed on furlough and the increase in home working for support staff, such as HR, IT and some technical functions, etc. A very small number of factory closures/mothballed have been announced, some of which are not unexpected. On the positive side, some companies reacted very well and very rapidly following lockdown, temporarily closing factories to implement COVID-safe practices while taking the opportunity to undergo some maintenance activities.
The government has issued guidelines for the manufacturing sector which have been adopted and are now normal practice. These include safe working distance, one-way systems, sanitiser bottles, reduced use of offices and canteens, altered shift patterns, reduced visitor and contractor numbers, temperature measurement, recording of contact details, COVID inductions, risk assessments and booking procedures for HGV collections to reduce the number of people on-site at any one time.
Meetings on platforms such as Teams have become commonplace to save travelling time and to operate safely. Generally, this appears to have worked well. Some have reported that the stigma often experienced for home working has gone and many individuals report greater productivity not least due to reduced travelling time, and the environmental benefits of home working by way of reduced road miles are welcomed. This is, however, only applicable to certain support functions – a factory still needs people on-site to operate and maintain production processes. The industry is highly mechanised so the impact is not as severe as it would have been 15 or 20 years ago.
Most companies are reporting sales almost back to normal levels for the time of year. This has been closely linked to construction sites re-starting and builders merchants re-opening. There are varying reports about what types of products are in demand. There are reports that niche products have not returned to normal levels, while some small hand-made niche operations are experiencing higher demand and some of these factories are looking at expansion. It is safe to say that most heavy clay works are currently busy.
There is great uncertainty about the future throughout the supply chain. Housebuilders are completing projects, while the number of new-starts are down. This means it is difficult for manufacturers to plan capital projects with any confidence. No-one wants to risk large amounts of capital on new equipment or improvements to increase capacity at a time when it is by no means clear whether a second wave of the virus is imminent, and if so, how severe it would be and more importantly whether another widespread lockdown may be likely. Everyone is conscious that government has spent a substantial sum of money in support measures which while very welcome, will impact the economy for some years. We await announcements regarding how this money will be recouped by the Treasury.
In addition to dealing with a pandemic, we are now coming back into the other major area of uncertainty – Brexit. The Prime Minister needs to convince investors and developers that ‘build, build, build’ is a sound investment strategy which will be followed by ‘buy, buy, buy’.
Will the market stagnate in the coming months as we head into winter, with possible redundancies in many sectors as the furlough scheme is wound down and Brexit uncertainty bites? That is the question. We have played our part, adapted and modified our businesses to meet the needs of the times. Things may look different and some working practices will change, but I am still sure that the production of high-quality heavy clay products will continue well into the future. There can be no doubt that it’s going to be a bit rocky for a while, but when we say our sector is resilient it’s because we’re used to ups and downs – this has certainly been true of my 40 years in the business. Nonetheless, the next 12 months will be very challenging for everyone.
Keith Aldis, CEO of the Brick Development Association (BDA)
Obviously when COVID-19 hit, the industry, like other sectors had to take measures to protect both their customers and employees. They also had to pay particular notice to the government’s instructions to shut down. With health and safety paramount and a safe cessation of business in the normal sense of the word, this inevitably meant that each firm had to make the difficult decision to cease production in a timely and safe manner. Clearly, the downturn in construction has a significant effect. This was coupled with the temporary closure of almost all builders merchants and brick factors (re-sellers) in the UK for a short while during the early stages in May. Demand therefore was briefly curtailed but deliveries continued, albeit on a lesser scale. Production slowed massively but did not completely stop during the initial stages of the pandemic.
As the ramifications of the virus became apparent and as government eased restrictions, firms began to re-start their kilns and production. At the time of writing (September), I’m pleased to say that production and distribution is now almost nearing normal levels, although with the slowdown of construction, per-se, we are at slightly lower levels of production and distribution than this time last year.
During shutdown, brick makers took the opportunity to revisit their operating protocols and plant safety procedures updating them to the new normal. We hold about 400mln clay bricks in stock in the UK at any one time, which is enough for about three months building in normal times.
Once the construction sector had agreed its COVID-site operating procedures, building sites were able to re-open and this together with the re-opening of the merchant sector, meant that we were beginning get back on track. The clay brick sector maintained its strategic reserve of three months supply of clay brick and so apart from a short period where construction did not take place, supplies remained available. Demand is now increasing cautiously and will continue to do so while we ease out of the pandemic.
It is therefore incumbent upon us to inform and remind those customers that clay brick is the medium of choice, if one wants to design and build fantastic looking buildings.
During the pandemic we produced about eight useful videos. In addition, we continued to produce our weekly Brick Bulletin to remind people of the wonderful product that is clay brick and importantly produced our new Guide to Successful Brickwork.
We remain in uncertain territory with respect to COVID-19. This with the potential uncertainty about a deal or no-deal with the EU once the transition period ends on the 31 December and the fact that we are entering our winter period – a relatively quiet period – may mean a short-term downturn.
Happily, the UK Government is committing to a comprehensive building programme and is committing funds to support this, as well as having previously supported employment though the Coronavirus Job Retention Scheme and other programmes such as various business loans. Efforts are also being made to support the skills base including work being done to support the training of bricklayers.
We simply just have to keep our collective wits about us, hone our businesses and work together to regenerate business opportunities for the future. I am ever optimistic that the construction sector, as it has in the past, is well positioned to pull the UK out of any future recession
Stephen Harrison, Chief Executive of Forterra
Inevitably, our results were heavily impacted by COVID-19 and the associated lockdown. As a Group, we acted decisively to manage our cost base and ensure sales and production remained balanced. We have now substantially completed a range of restructuring actions and production has now resumed at all our factories.
In the first instance, demand for our products fell dramatically and we ceased production at the majority of our facilities. However, sites remained in operational states and inventory levels were maintained, which allowed deliveries to continue and orders to be fulfilled. A skeleton staff was retained at all brick sites throughout lockdown to preserve the kiln conditions so they could be restarted easily when required. Since emerging from lockdown, trading has exceeded management’s expectations and we remain very confident in the long-term recovery of our markets.
This security of supply has been further ensured by having our fully owned and dedicated distribution fleet available and operational. This has enabled us to put in place stringent delivery practices – such as one driver per lorry – that fully comply with social distancing requirements to protect both our own employees and those of our customers.
From an administrative perspective, our external sales force and our back-office functions have been working remotely ensuring that the business continues to operate with full capability.
Protecting the health, safety and wellbeing of our employees, as well as that of the wider community, remains my primary concern. We continue to follow government guidance, have implemented homeworking for many of our colleagues to maintain high levels of customer service and are actively engaging in social distancing to ensure those who have to be at their workplace to carry out their jobs can do so as safely as possible.
The other key consideration is that we have sufficient cash to continue to pay our employees and suppliers, so reducing the risk of excess inventory build is essential.