2024 Predictions for the Builders’ Merchants Industry

Builders’ merchants across the UK have continued to face challenges when it comes to attracting new staff, rising costs in materials, and embracing Net Zero. What does 2024 have in store for the construction and builders’ merchants industries? How can merchants get ahead and prepare strategies that will help to overcome the challenges? ECI polled businesses in the construction sector from around the UK to find out what’s in store for this year, and how to find the hidden opportunities.

Employment shortages crisis

The construction industry, among others, has continuously faced challenges when it comes to employment. The UK Trade Skills Index 2023 report revealed that 937,000 workers will be needed in the construction and trade industries by 2032 to meet growing demand.

According to Claire Watson, managing director at Airmatic, this will only be rectified if young people are offered better opportunities.

“The UK is facing labour and talent shortages which could worsen if not addressed. There are currently over 140,000 vacancies that need to be filled, so attracting and retaining talent is key.

“Offering better opportunities for young people is crucial to bridge this gap.”

Recruiting and retaining is a widespread concern and initiatives like the Builders Merchants Federation (BMF), ‘Make a Material Difference’, highlight the positives of working within this sector.

Chris Fisher, website and product data management solutions expert (BMBI) and VP of EMEA LBMH division at ECI Software Solutions shares the importance of this sector coming together to overcome this.

“In an effort to address this issue, ECI recently signed up their support to the Builders Merchants Federation (BMF) initiative which asked other merchants to share why they like working within this industry. Merchants supporting each other where we can is imperative to show the benefits of this sector, especially helping to attract and retain the next generation of workers.”

Liz Drummond, managing director at Great Yorkshire Builders also believes employment is a priority.

“The reduced construction work from last year has led to a mass layoff in the industry resulting in a large pool of labour and tradesmen looking for work or new positions. With a larger labour pool, the cost of wages should be reduced or even frozen and with a lack of demand materials should become more competitive.

Keeping up with Net Zero

In 2021, the UK published its Net Zero Strategy intending to set out a pathway to reaching net zero greenhouse gas emissions by 2050.

Builders’ merchants will have a critical role in delivering low-carbon homes. Merchants will be under pressure to deliver products like energy-efficient boilers and insulation - having a knock-on effect on the materials shortage crisis.

Claire shares that many compliance and regulation changes will be on the way.

“There may be adjustments required to construction practices, building codes, and health and safety. As the landscape changes, targeted training to encourage the workforce to adopt the ongoing changes is crucial. Not only for staff safety and wellbeing but also to enhance a business capacity and reputation.”

The main challenge is achieving this whilst keeping costs down and quality high.

Jennifer Thompson, CPO at Machine Max, shares the importance of actioning change while keeping costs low.

“As we look ahead to 2024, it's clear that the scrutiny concerning Net Zero will continue to ramp up. The construction industry has long required urgent action, and time is rapidly diminishing for it to respond appropriately and achieve set targets.

"The focus on energy consumption, especially within sectors like heavy machinery, is set to be prominent in the new year.”

To achieve the goals of Net Zero, Jennifer says, “closer monitoring of machine metrics is one solution that should take shape, allowing companies to correctly identify operational efficiencies throughout all stages of a project - knowing how and when machines are being used can make a big difference in fuel consumption.

"We left 2023 still behind in the fight against climate change, and time is now finite. If we’re to futureproof our environment, then delivering a joined-up strategy is vital. This begins with the monitoring and management of machinery and carbon measuring frameworks.”

Pressures of rising costs

The cost of construction materials is continuing to increase and a 2023 Knight Frank report revealed that material costs have risen over 40% in two years while labour costs are up by nearly 10%.

Claire shares how macroeconomic events are still contributing to the challenges merchants face.

“Various global events and economic uncertainty throughout the previous years may continue to challenge businesses. The disruptions caused across the global supply chain have significantly impacted material availability and costs, consequently holding up investment and project budgets, and ultimately leading to delays.”

Eric Hargreaves, Director and Founder of Your Choice Home Improvements highlights that it might be the time for innovation for all businesses.

“Companies with large overheads & little innovation are struggling to compete, and many well-known companies such as Safestyle have gone under. The dinosaur or old-school companies will fall by the wayside leaving newer and more innovative businesses to fill the void in the market.

“Businesses that have been able to adapt to the challenges over the last few years, who have improved their product offering, and marketing capability and trimmed overheads, these companies stand to take advantage of the favourable conditions predicted in 2024. However, companies that have tried to ‘ride the storm’ the last couple of years with little innovation will likely continue to struggle and will fall by the wayside; like Safestyle.

It isn’t just the cost of materials either. Liz shares that there is a decline in interest in the residential building market.

“The back end of 2023 saw a massive drop in interest in the residential building market, with both architecture and building companies struggling to secure new work. We have yet to see the typical January boom in interest for new building projects.

“Building and construction companies have started to adjust their spending and reduce their overheads and likely will be cutting profit margins to secure new work next. As such, the cost of building should stabilise or even come down.

“The average wage in general has gone up and it now looks like overall inflation is down and lending/mortgage rates are coming down along with it. If this trend continues in the first quarter of 2024, I can see a mini-boom of interest in Spring and construction being back at high levels through the summer and winter of 2024.”

Eric suggests in the future material costs might decrease.

“Predicting the coming climate isn’t an easy feat, but hopefully, with interest rates declining in recent months, the property market should rally and as a direct result of that, ideally, the demand for building work like home improvements will increase along with it.

“We would also expect to see less profiteering from manufacturers and a genuine easing of inflationary pressures on material prices, which have been going through the roof in recent years. There still remains a challenge to find good talent at the right cost, but we expect to see an easing of this in the next 6-12 months.”

Tackling rising costs, staff shortages and net zero changes is no easy task and as always there will be small issues with innovation. Integrating software that reduces project delays, provides full visibility over the supply chain and offers easy training for the next generation to use technology, builders’ merchants will be best equipped to meet new skill requirements and slowly build a better infrastructure.

Chris says innovation is what will be the key to attracting potential employees to this sector.

“The future of work is very technology-focused, and it’s only a matter of time before businesses wake up to the limitations of legacy systems.”

“Digitising the business can help streamline structures and address the current challenges. Reducing manual tasks can provide more time to sourcing eco-friendly building materials and minimise potential inefficiencies of large quantities of unused materials.

“Employees have the opportunity to upskill with a higher chance of growing within their position and this will open up more opportunities for the next generation to join the industry. Those who embrace change will be able to feel more secure, invest in employee retention and have the flexibility to adapt as the economic cycle continues to fluctuate.”

Find out how ECI’s Spruce business management software and Spruce eCommerce platform can help builders’ merchants tackle these challenges and maximise new opportunities in 2024.