By Tom Bowtell, CEO
Coatings, printing inks and wallcoverings are critical to UK manufacturing and construction, and sales are generally impacted by GDP movements, so you can imagine its been a bumpy ride over the past few months.
Starting more broadly with UK manufacturing, Make UK’s latest numbers report 77% of manufacturers having used the furlough scheme, with over 50% planning redundancies in the next 6 months. 41% of MakeUK members think the recovery will take more than 12 months, a view echoed by BCF members.
Looking closer to home, there have definitely winners and losers in our sector : the growth in DIY with so many furloughed staff means that retail paint and woodcare have done well since May, when most outlets had reopened. Printing inks for food packaging were also in greater demand, with everyone buying more food at home through lockdown.
Sales of industrial coatings dropped by 35% in April, 37% in May but improved in June, albeit a further 6% below June 2019. Professional decorators and construction coatings have also been badly hit; 50% down in April, 20% in May but June’s numbers were the same as 2019, which is encouraging. Printing inks for newspapers have seen a 70% drop in output; this crisis has brought forward the switch to digital by several years. Wallcoverings sales were down 8% in Q2 2020, but flat year to date after a strong first quarter.
When you add everything up, UK paints and coatings sales were up over 45% in June, and now 4% up year to date. This is all driven by retail and woodcare growth, with industrial coatings still struggling. One has to say this is a huge improvement on April and May, and much better than we were expecting when forecasting at the peak of Covid-19 back in April. However, I doubt such high levels will be sustained as more people return to work.
Looking to the future, the results from our confidence survey were released in mid-July. 36 companies took part, most were small companies. Half were industrial players, 9 were decorative and 8 were printing ink companies. Overall, confidence has plummeted. The index is down to 37 from an average of 71. Even when companies were worrying about a no deal Brexit, the lowest point was 58.
Members were asked about their forecasts for second half of the year, and the results are very much dependent on which sector you are in. 66% of decorative coatings companies expect growth, whereas 95% of industrial companies predict lower sales. Smaller companies appear to be hardest hit, with 76% of smaller companies expecting sales to drop versus 58% of medium sized companies.
Most BCF members think it will take at least 18 months or a year beyond that to get back to where the sector was pre-Covid-19. 6% of respondents don’t think the sector will ever get back to where it was. The BCF’s view is that it will be a long, slow recovery. One positive thing from our survey are the employment forecasts – 47% of companies said there would be no change in headcount and 33% of companies felt that the decrease in staff numbers would be small.
Forecasts on the global impact of Covid-19 on the coatings industry across the world show a forecast 2.3% volume drop in 2020. Latin America and North America will be hardest hit. Asia got into the crisis first and out of it quickest and will be the least affected. In Europe there is a 2.3% decline; but the company by company impact really depends on which sector you major in.
The outlook for the future will depend on GDP growth, and with unemployment numbers expected to rocket up after October, we have a tough period ahead of us. However, when the economy recovers, the coatings and inks sector will also rebound.