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Construction challenges will impact builders merchants

Housebuilding, construction logistics


According to the Construction Products Association and as reported in Builders Merchants Journal construction output is set to fall by 2.1% in 2024 The two sectors that will be affected the most are private housing new build and repair, maintenance and improvements (RM&I), the mainstay of most builders' merchants turnover. 

After the spike in mortgage rates in 2023 many house builders reported a fall of 25-35% in demand for new houses. Although interest rates have been falling more recently the drop in demand for new properties is likely to continue for the remainder of 2024, with private housing output expected to fall a further 4% over this coming year. The market for house improvements is also in decline with the rising cost of living and falling consumer confidence taking effect.  and the The reduced number of property sales also has an impact as many buyers undertake refurbishments within the first 9 months of their new ownership. 

The third largest construction sector – infrastructure, however, has remained steady, as work continues on HS2, Hinkley Point C and Thames Tideway Tunnel along with a number of road schemes across the country, though concerns are rising as some delays are occurring with national highway projects. Local councils are also facing financial constraints and reducing the number of road improvements. Overall infrastructure output is expected to fall by 0.5% in 2024. 

The above forecast follows an already tough time for builders’ merchants, The Builders Merchant Building Index (BMBI) reports that builders’ merchant takings were down in November 2023 by 5.7% compared to 2022 and also down on the previous month by 4.4% with volumes falling 12.1% year on year and down 7.5% on the previous month. Revenue did not fall by as much as volume due to inflationary price rises, on average prices were 7.2% higher than the previous year. Although volumes in half of the 12 categories monitored by the BMBI were steady, the three largest categories all declined, heavy building materials -7%, landscaping -7.4% and timber/joinery products -10.9%. 


Construction site management


The future for construction looks brighter in 2025 

Builders’ merchants' total sales revenues for the period Jan-Nov 2023 were down 4.9% compared to 2022 and volumes were down 13.8% while prices rose by 10.3%, with 2024 looking like being just as difficult for builders’ merchants. However the future looks brighter, the Construction Products association has predicted a growth in volume for 2025 of 3% for private housing RM&I, a boost in demand for private housing and output expected to rise by 4% with infrastructure rising by 1.2% in 2025. 


How can builders’ merchants prepare for this volatile market? 

So how can builders’ merchants prepare for the future and this volatile market? They are going to need to maximise profitability with falling volumes in 2024 and be ready in 2025 for increasing volumes. Sitting alongside this through 2024 is the prospect of increasing driver’s salaries and a European-wide shortage of van and HGV drivers. Builders’ merchants need to invest now in solutions that can help them optimise their deliveries in order to minimise logistics costs, enabling them to utilise their existing resources of vehicles and drivers but also to be ready when the time comes in 2025 for an increase in demand and volumes. During the leaner period of 2024 customer service is also going to be crucial in retaining customers and their loyalty in order to retain repeat business. 


To discover how Descartes can improve builders’ merchants’ deliveries and improve customer service contact an expert now.