There are some sectors in which the market is beginning to look increasingly encouraging - roofing and cladding is one (more of which another time) and floor coverings is another. In a new report from MTW Research on the UK floor covering market suggests that the double-dip recession has cost suppliers more than £1 billion in lost sales during the last 5 years, though growth is expected to strengthen in 2013 as macro-economic conditions slowly improve.
Based on industry data from more than 190 companies, the research for the report found that whilst industry assets have remained static in the last 3 years almost one third of floor covering suppliers have exhibited strong sales growth in the last 12 months. Commenting on the figures, MTW suggested that, “Following a difficult few years, retailers growth rates reflect an increasingly positive trend in the domestic floor coverings market in late 2012, this will be strengthened by steady growth in business investment stimulating higher demand in the contract floor coverings market from mid 2013 onwards.”
In the last 2-3 years, the commercial floor coverings market has experienced a particularly difficult trading environment as business investment has remained low across a wide range of key sectors for non-domestic floorcoverings. MTW’s 270 page report finds that investment levels by commodity goods retailers have exhibited modest growth in recent years though higher value retail and service sector applications have experienced lower demand for floorcoverings as a result of declining activity in terms of both new build and refurbishment activity.
Whilst public sector cuts are set to dampen demand for floorcoverings as austerity continues to bite, private sector demand in the contract floorcoverings market is forecast to strengthen in key target sectors such as commodity retail and leisure in 2013, with demand from higher value retail and service sectors likely to grow in real terms during 2014. According to MTW, growth from commercial markets coupled with some moderate rises in industrial floor coverings should offset public sector declines from mid-late 2013 onwards, prompting greater optimism for the non-domestic floor coverings sector.
Following flat trading conditions in the last 2 years, the domestic floor coverings market is set to offer moderate growth in 2013, though MTW sound a note of caution that demand is likely to be modest at best as ‘big ticket’ home improvement spending returns to growth slowly. In addition, a lacklustre domestic new build sector coupled with historically low house-moving activity levels continue to present challenges in the floor coverings industry in late 2012, with conditions only likely to improve from mid 2013 onwards as the economy slowly returns to real term growth.
Despite sales of floor-coverings remaining flat in the last couple of years, MTW point to a core strength in the floor covering retailer channel with more than 90% of companies reportedly having either a ‘good’ or ‘fair’ credit rating in late 2012, underlining that the industry is ready to meet the demands of growing market demand in the near to medium term. However, the report also identifies that just under 10% of retailers are currently considered ‘at risk’ of imminent failure, as margins remain under pressure due to ongoing price sensitivity in a number of key sectors in the floor coverings market.
The report identifies market size and trends for each of the key floorcovering product sectors and finds that the carpets market has lost some share as pricing pressure remains a key issue influencing carpet specification and purchase. Sales of laminate and wood floor coverings have now stabilised in 2012 according to MTW, with laminate and wood flooring suppliers not anticipating any substantial further movements in terms of product share. Product development and innovation in the ceramic flooring market is offering some growth opportunities for tile manufacturers and distributors with developments in ultra thin tiles, glazing innovations and metallic finishes all providing healthy value added opportunities for the sector.
MTW’s qualitative and quantitative review of the UK floorcoverings market provides reasonably positive forecasts for the market overall to 2016, though the report sounds a note of caution that these forecasts are subject to the ongoing fragility in the UK and European economies in late 2012. Nevertheless, the near to medium term future appears increasingly positive for floor covering suppliers, with the industry’s longstanding optimism and expectations of growth slowly being realised.
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