The media has dedicated countless pages to the demise of the construction industry since the recession started in 2008. As one of the industries to have been hardest hit by the downturn, the knock-on effect is taking its toll on those further down the supply chain with contractors, sub contractors and other suppliers feeling the brunt of the slow down.
It is perhaps not a surprise, therefore, that nationwide insolvency practitioner SFP has been called upon to administrate a number of recent business insolvencies of trades supplying to the major building firms. Most recently, it was appointed administrators of Regency Tiling Limited, a Chelmsford-based business that supplied ceramic tiles and flags to many of the major housing developers including Barratt Homes, Crest Nicholson, Bellway Homes, Ardmore Construction, Persimmon Homes, Explore Living, Bellwinch Homes and Taylor Woodrow.
In the residential housing market – the main source of demand for tiles – the severe economic conditions of recent years has hampered output significantly. Housing starts fell by almost a half in 2008/2009; private sector housing construction output fell sharply in both 2008 and 2009; and, more recently, public sector spending cuts have adversely affected public housing output. This issue has been compounded by the lack of mortgage availability, with many consumers unable to raise the large deposits now required to buy their first home. This, in turn, has resulted in the rapid decline in the number of residential property transactions, resulting in further reduced housebuilding activities as developers lose confidence in the market. The impact of this deterioration in the UK housing market has led to depressed demand for bricks and tiles.
Not every house builder is suffering. Indeed certain builders within the residential housing market appear to be doing well. The Government too has been trying to do its bit to help, having recently introduced a number of measures and funding initiatives aimed at encouraging increased house building activity. These include the release of significant funding to unlock stalled housing construction sites across the country. One such project includes plans for 22,600 new homes in Ebbsfleet, Kent with over £100 million already invested in the project. It is a project that could create up to 60,000 jobs. There are also plans to release publically owned land specifically for the creation of new housing, employment opportunities and other construction activity. These initiatives, while unlikely to restore housebuilding activity to pre-recession levels, will inevitably generate increased demand for bricks and tiles as additional housing projects commence.
Unfortunately, they have come too late to save Regency Tiling. Established in 1997, the firm operated out of a purpose-built industrial unit on the Boyton Hall estate in Boyton Cross and employed four people. Despite a turnover of around £1.2 million, SFP was appointed Administrators on 23rd July 2012, after it accrued debts of approximately £100,000.
Daniel Plant, Group Partner at SFP, says that the pressures experienced within the construction industry is now filtering down the supply chain: “We are finding a number of contractors, sub contractors and suppliers are experiencing cash flow problems due to a number of factors, and in particular in this case the increase in the cost of tiles.
“Although we were in discussions with a number of interested parties, we were unable to sell the business as a going concern but have sold the assets off on a piecemeal basis.”The future for construction is at best uncertain. Public sector spending cuts have yet to bite, but when they do, the impact could be dramatic. The industry itself predicts a challenging future, and any growth in the bricks and tiles market specifically will be subdued until at least 2015.