The UK market for
wall cladding is estimated to have increased by around 40% between 2013 and
2017 in volume terms. In 2017/18, growth has been driven by strong growth in
new build and major refurbishment output in the broader residential, commercial
office, schools and universities, hotels & leisure facilities and
warehousing sectors. However, in the retail and healthcare sectors and in
certain segments of the leisure market, output levels have either declined or
remained static. The forecast for 2018 is also for little to no growth.
Other than the state of the
general economy and issues emanating from the ‘Brexit’ negotiations, it is the
Grenfell Tower fire in 2017 that could have the greatest impact on the cladding
market going forward. A possible ban on the use of combustible materials on
buildings over 18 metres tall may well depress demand for cladding systems
comprising rigid polymer insulation while benefitting those classified as A1
under Euroclass definitions e.g. stone and glass wool, concrete and fibre
cement.
While investigations into other
high-rise residential towers, with cladding similar to that installed on
Grenfell Tower, have revealed that around 500 are similarly vulnerable to rapid
fire spread, relatively few buildings have so far had the old ACM cladding
replaced. With a number of local authorities and housing associations experiencing
severe financial problems, that is unlikely to change in the near future.
Although modest annual economic
growth levels are currently forecast to 2020, the medium-term outlook will be
dependent upon the path taken to exit the EU and the type of trade and
legislative deals formulated. As a result, our view is that demand for cladding
will decline. Over the period ending March 2019, at the very least, the
uncertainty created by the Brexit situation is likely to create more volatility
in the construction market at large, which in turn will lead to a lack of
confidence among property investors and business owners.
Other issues include a
weakening of Sterling against the Euro and the US dollar, endemic problems
concerning skills shortages in key areas, and the challenges associated with
the changes to fire regulations and changed specifications for cladding
products.
Other factors that are expected
to contribute towards slower growth include the cutting or ending of subsidies
for certain products and development programmes. For example, the government’s
Energy Company Obligation (ECO) expires next April. A key driver stimulating
demand for external wall insulation, it is likely that, as with previous government
energy efficiency schemes, once ECO is complete there could be a large drop in
demand.
The ‘Wall Cladding Market Report - UK
2018-2022’ report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242
235724.
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