Mixed picture met by a proactive brick manufacturing industry

Industry is meeting current challenges proactively and the sector is recovering from conditions during the pandemic. Clay Technology speaks to industry insiders about the expectations for 2023.

The latest executive survey on the UK manufacturing sector from trade body Make UK and financial consultants PwC contains three key findings.

Firstly, the industry is focusing on tackling costs, with 70% of manufacturers  expecting a significant increase in energy costs, 54% adjusting business practices to reduce consumption, and 39% focusing on generating onsite electricity. 

Secondly, the industry is looking to remain competitive with 52% of firms retraining and upskilling staff and 43% investing 
in green technology. 

Thirdly, the industry is regaining confidence with 46% of those surveyed wanting the government to extend the energy bill relief scheme, 38% wanting to invest more in digital technology and 29% calling for action to regain the value of the pound. 

The Office for National Statistics (ONS) has more positive things to report. According to its figures, construction output increased by 5.6% in 2022, which follows a record increase of 12.8% in 2021. At sector level, the main positive contributors were seen in non-housing repair and maintenance, and infrastructure new work, which increased 5.4% and 3.7%, respectively. The main negative contributors were seen in private housing repair and maintenance, and private new housing, falling 8.5% and 2.3%, respectively.

However, the Construction Products Association (CPA) forecasts a recession this year after two strong years. According to its Winter Forecasts, construction output is expected to fall by 4.7% in 2023 before recovering slowly in 2024 with growth of just 0.6%.

'The construction industry is not immune to the impacts of a wider UK economic recession, rising interest rates and inflation. Private housing new build – the largest construction sector – and private housing repair, maintenance and improvement (RM&I) – the third largest sector – are forecast to be the worst affected sectors this year. 

'Falls in activity in these areas are expected to be partially offset by continued growth in infrastructure, the second largest sector, which is already at historic high levels of activity. Even here, however, there are growing concerns over the impacts of double-digit construction cost inflation. Given financial constraints for government, this means that we are likely to see the value of activity expected previously but not the volume.'

The Construction Industry Training Board’s recent Construction Skills Network report states almost 225,000 extra workers will be required to meet UK construction demand by 2027.

On a positive note, the Make UK executive summary says, 'Despite rising energy costs, nationwide skills shortage and economic inflation, UK manufacturers are making proactive business decisions that will help them shape the future. They’re leading, rather than waiting to be led – finding new ways to add value and boost productivity while driving out cost and carbon to create a real competitive advantage.'

At the time of going to press, Wienerberger is reporting group revenues were up 25% last year to around €5.0bln, with 48% EBITDA growth to more than €1.0bln. External revenues at Wienerberger Building Solutions rose 17% to €2.7bln (versus €2.3bln in 2021). The group is looking to 2023 with a 'profitable, sustainable growth strategy' remaining in focus.

Ibstock reports strong financial performance in 2022 with full-year revenues increasing by 26% to £513mln (2021: £409mln). Joe Hudson, Chief Executive Officer says, 'These strong results reflect our continued focus on commercial and operational execution...Activity in the early weeks of 2023 has continued to reflect the more subdued demand environment experienced towards the end of last year, although we anticipate this to improve.'

Clay Technology speaks to leading figures about the past year and the prospects ahead.

Perspective from Steven Godfrey FIMMM, of the IOM3 Ceramics Group, representing the heavy clay community

Our industry has flourished following the pandemic, which created a shortage of product and has only seen a return to normal stocks towards the end of 2022. Brexit has created more paperwork when bringing in products from the EU but has not stopped high volumes of product being brought into the UK, to plug the gap of shortages of products in the country.

The current rates of production have continued at last year’s levels allowing manufacturers to build stocks to more sensible levels, but with stocks now building, import volumes are slowing with cheaper products available in the UK. As exports have generally been niche products, these have not been significantly affected.

The challenges facing our industry currently are huge, with it being an energy intensive industry our costs have significantly increased, which is being passed onto our customers who are seeing product cost rising at the fastest rate for many years. 

This is compounded by higher inflation, which is driving up raw material costs and mortgage rates, which again will have an effect on our ability to compete with other cladding materials and is likely to affect the number of houses built and thus the building products needed. 

The opportunities here lie in using new technology to embed greater efficiencies in our factories, looking at new fuel sources like hydrogen, moving to rapid firing electric kilns and reducing carbon emissions to ensure our industry remains viable going forward.

As tax on emissions has increased, the race to find lower-emitting raw materials has gathered significant pace and will need to continue if we are to get to a net-zero position. 

Energy reduction has been a theme our industry has been working on for many years and continues to do so, particularly with the current high energy costs. As new factories and refurbishment of old factories continues, we are seeing state-of-the-art processes, lighting and firing technologies with much lower energy usages – a theme that will need to continue to ensure we remain competitive.
 
The decarbonisation and circular economy agendas have to remain as the most important issues for the industry. Even with the more difficult economic times that we are likely to face in 2023/4, they need to be the focus of our efforts. A slowdown in business may help to give time and resource to find innovative ways of reducing carbon from all our processes, and give new ways of showing our products as long lasting and recyclable that can compete with any other building materials.

The sector’s toughest challenge and greatest opportunities for the foreseeable future has to be, in the short term, an economic slowdown, but more generally our ability to convince the market and our customers that our products are sustainable, giving low emission over their whole life and with new innovation will give a durable, strong, attractive cladding medium that will rival any other. 

The UK Government is giving support to a number of high-energy usage sectors including steel, paper, chemicals and metals and is forgetting our industry, which could see us not being competitive against other building materials and leading to contraction of the sector. This needs further lobbying to make sure we get support on an equal footing and ensure we can be part of providing housing stock to meet demand as our economy recovers. The opportunities are around using renewable energy sources to power our factories and vehicles, and driving our industry to net-zero to ensure we all have a long-term future.

Perspective from Keith Aldis, Chief Executive of the Brick Development Association

There is no doubt the rising cost of energy has impinged on costs, particularly those related to energy, which has placed a strain on the clay brick industry. Having said that, brick remains the building material of choice for a significant number of residential and commercial developers, planners, architects and specifiers, and production across the UK has been flat-out, with a concomitant increase in deliveries. Brickmaking in this country is in its best shape for the past 10 years. 

Production is intense. Capacity has increased by another 100 million bricks in 2022 to meet demand and we anticipate a further increase in 2023 as new production lines come on stream. 

As a result, we need to ensure buyers focus on buying UK-manufactured brick, as opposed to EU and, in particular, non-EU bricks. This applies especially to some of those manufactured in the Indian sub-continent and Southeast Asia under intolerable conditions akin to modern slavery. It is vital the investment being made in British brick is not wasted.

This investment was over £250mln last year with Forterra almost completing Europe’s largest brickmaking plant at Desford and a refurbishment of its Wilnecote plant, and Ibstock investing in its Atlas Net-Zero plant, Eclipse lines and its new brick slip factory planned for Nostel. We anticipate investment continuing over 2023 and through to 2024.  

The volatile economic climate, with the dangerous combination of rising energy costs and sharply increasing inflation, together with a sluggish labour market, poses some problems but we believe these will be manageable in the long term.

Bricks, inevitably, will cost more. But the durability of British brick and the fact it is a sound investment means our industry is confident of riding out the storm. Bricks continue to make economic sense for builders and on average are a tiny part of the cost of building a new home, with about 70% of the visibility.

Our industry is also adopting a strong sustainability agenda, which will enable us to tackle future challenges with confidence and turn some of those challenges into opportunities.

Our members are very conscious of the need to reduce emissions and the use of energy, and they go the extra mile to ensure they adopt the most effective – and the most modern – sustainable methods. This includes monitoring emissions and managing their use to reduce them as far as possible. 

Our members also carry out full waste audits, so they know where their waste is going and ensure as much as possible is reduced, reused or recycled. For example, one of our members has a factory site next to a redundant quarry, which has been used as a landfill site for the past 25 years. The methane gas is captured and provides 0.5MW of electric energy per year to the local grid. A new quarry site, next to the factory, has gone through environmental impact assessments and requires approval from the water board, the Environment Agency and the local authority, which needs a full restoration plan for when it is finished. 

The quarry will undergo ecology, hydrology and even archaeological surveys. All this is underpinned by law with the directors responsible if they do not satisfy all these organisations. So, in my view, UK brickmakers are very much at the top of their game in this area.

Decarbonisation and circular economy agendas have to remain at the forefront during more difficult economic times for industry. It would be very counter-productive to think only of short-term needs. 

Brick has been around for centuries, and our industry has consistently adapted to changing circumstances. Brick is sustainable by its very nature. Yes, costs need to be controlled, but not at the expense of the environment. We want to celebrate best practice in the use of brick in the built environment and to explain how investment in production processes, currently being developed by the UK’s clay brick industry – such as renewable energy, carbon capture, biomass and hydrogen fuelling – will see further carbon reductions in clay-brick production in the future. 

Indeed, carbon use in brick production has already been reduced by about 25% over the last seven years. And with local production supporting the local vernacular, UK clay bricks can be transported in an environmentally friendly way, saving on fuel and road-use and therefore reducing their overall carbon footprint. And because they are made locally it strengthens the local – and circular – economy. 

The toughest challenges are keeping costs down, competing successfully against imported bricks, especially those made in horrendous conditions that I’ve talked about on many occasions. Ensuring everyone in our industry knows the provenance of all the bricks they use and attracting skilled labour should be a priority. The opportunities are many, but key ones include tirelessly promoting the virtues and benefits of British brick and following a viable sustainability agenda. Our members have helped to create some of the finest buildings in the UK, indeed the world – and they will continue to do so. We need to let everyone know about these achievements.

Perspective from 
Rob Flello, Chief Executive British Ceramic Confederation

The UK ceramics industry is a diverse sector covering bricks, roof tiles and drainage pipes, whitewares –  including tableware, giftware, sanitaryware, floor and wall tiles, refractories, and advanced ceramics for numerous electronic, medical, aerospace, environmental, military, and structural applications. It sees approaching £2bln in annual sales, with £600mln in export sales. There are around 20,000 jobs reliant on UK ceramics and tens of thousands of indirect jobs.

The sector is one of the most energy-intensive manufacturing industries in the UK, relying heavily on gas to fire kilns and for drying product. Therefore, the energy crisis delivered a body blow. Soaring energy costs remain challenging, with tens of millions of pounds added to the gas bills of UK ceramic companies.

However, we are a resilient sector, and our members report strong order books both in the short and medium term, both at home and abroad.

Looking to the future, the sector is committed to net-zero, and UK ceramics has been quietly playing its part for decades. Over the past 10 years alone, the UK’s ceramic manufacturers have invested more than £600mln of their own money into decarbonisation. 

Last year, the British Ceramic Confederation held its inaugural ‘Delivering Net Zero for British Ceramics’ conference, which was a great success. It promoted and celebrated industry best practice, research, and collaboration, while focusing on decarbonisation initiatives that are crucial in helping the ceramic sector on its journey to net-zero.

Twelve of our members took part in a hydrogen project, awarded significant funding by the former Department for Business, Energy & Industrial Strategy. The project successfully studied the initial feasibility of using hydrogen as a fuel for the ceramics sector.

The use of hydrogen poses many unanswered questions. As yet, we still do not know whether every ceramic product can be fired using hydrogen kilns. Hydrogen delivery presents issues as ceramic manufacturers are often located in rural areas or are surrounded by houses. Most of our members, along with many UK manufacturers, also operate from older factories that are not geared up to use hydrogen within their pipework. 

To answer these questions, the UK ceramics sector needs major government support, so it can free up investment to develop and deploy innovative technologies. A company generally only has one pot of money for innovation, including decarbonisation. The cost of energy is impacting heavily on business finances and, if the company has already drained the pot to pay exorbitant energy bills and on carbon levies, the opportunity for investment is lost. 

UK ceramics is at the very heart of what the UK needs for a strong manufacturing backbone. It is a strategic sector for the UK in underpinning all foundation industries and is central to the decarbonisation of the UK economy. 

However, the government’s announcement of a British Industry Supercharger may be welcome news for other energy-intensive industries, but it is no help at all for the vast majority of UK ceramic manufacturers. UK ceramics continues to face a significant competitive disadvantage from the lack of a level playing field on electricity prices, and excluding an essential manufacturing sector such as ours from support for electro-intensives is short-sighted. 

Without ceramics, the production of renewable energy is hampered as, without refractories, there is for example no steel for wind turbines and no glass for photovoltaic panels. Ceramics are needed for electric vehicle batteries. Without high-temperature industrial processes, there are no durable homes or commercial properties. There is no heat from waste without advanced ceramics. 

Therefore, the government risks making the UK’s foundation industries wholly dependent on imports, as well as the obvious damage to UK jobs, particularly in levelling up areas.
The UK ceramics sector continues to produce world-class products and has plenty of opportunities to sell them globally, provided we are allowed to be competitive. We don’t need an advantage – the products sell themselves – but we do need it to be fair. UK ceramic manufacturers are still competing against unrestricted imports from countries that are providing a far higher level of support to their own manufacturers, be that with cheap energy or subsidies.

Competitive energy and carbon prices are therefore needed to give energy-intensive industries a level playing field internationally. Long-term support underpins long-term growth, and we look forward to further discussions with government about supporting the UK ceramics industry, on which the British economy depends. The vital and strategic UK ceramics sector must be protected.