26 Sep 2022

Forecasting is a mug’s game, but here goes…

Is construction headed for a new supercycle or business as usual, once we’re through the next recession?’ asks Mike Rigby, CEO of MRA Research.

From weather to climate change, business plans, stock markets, elections and the economy, we’ve become forecast junkies. In today’s world forecasts keep the wheels spinning. We might think ourselves above sorcery, tea leaves, crystal balls and star signs, but we still believe forecasts.

Some futures are easier than others to read. We’re good at forecasting tomorrow’s weather, not so good at predicting large weather events like hurricanes, floods, droughts, and prolonged heatwaves. Spotting global black swans so we can take evasive action is also a pipe dream.

Last year I wrote that RMI and construction are positioned for long term growth. But, given the war in Ukraine, an energy and cost of living crisis, soaring inflation, massive value destruction by Liz Truss and her chancellor, and then Rishi Sunak’s and Jeremy Hunt’s Austerity.2 to limit the damage, was this just pie in the sky?

To be clear, I did not mean, as Gordon Brown once said, there would be no more booms or busts. The economy will continue to rise and fall, and we’ll still have recessions, but average trend lines in construction will be significantly higher.

Six strong trends will drive this growth in construction, home building, RMI and home improvements.

  1. 1. The population has grown faster than the rest of Europe and demographics make further growth inevitable. We are a crowded island, and we didn’t have enough houses of the right sort in the right places. House prices rose around 10% this year, as demand swamped supply. Rents are rocketing in the cities too. There aren’t enough homes to go around, and Government and NIMBYs can’t keep kicking this can down the road.
  2. 2. We have the oldest, least energy efficient housing in Europe: around 20% of carbon emissions leak from our homes into the sky. Unless we upgrade their insulation we stand no chance of meeting carbon targets. The current energy crisis is dramatically improving the returns from investing in energy efficiency, and this is no short term speedbump.
  3. 3. During the industrial revolution people left the country to work in factories and cities. Now they are returning. It’s the biggest change in where we live and work in the last 250 years. A recent survey found that 70% of senior board level managers in big UK companies think hybrid or some form of working from home is here to stay. Nearly 80% of the public thinks so too. House movers and improvers are a big opportunity.
  4. 4. Our homes were never designed to live and work in, so people are adding living space or remodelling their homes to make it easier to work and live in comfort. Extensions, conservatories and garden buildings are experiencing a boom.
  5. 5. The 20-year trend separating homeowners into the Haves and the Have Nots was boosted by the pandemic. Rising house prices have added to the housing wealth of the Haves – the Bank of Mum and Dad – older homeowners whose homes have risen dramatically in value. They’re improving their homes because they enjoy the improvements and because it makes financial sense. A window manufacturer said recently: white windows are becoming a luxury item. Those who normally buy them (the Have Nots) can’t afford them, while the Haves have even more money to spend on premium flush windows, colour, aluminium and complete makeovers.
  6. 6. 2 million properties in England built on flood plains will need upgrading to keep them habitable and the risk from flooding is growing.

Welcome to RMI.2, the new normal for home improvements.