Rumours of three-day weeks surface as ‘double whammy‘ of oil price rises and a drop in new housing starts hits manufacturers

Brick manufacturing is the latest sector in the industry to fall victim to the credit crunch, with deliveries of bricks to sites plummeting 13% during the first quarter of this year.

The fall was revealed in the latest figures compiled by the Construction Products Association (CPA) and the Department for Business, Enterprise & Regulatory Reform.

Dr Noble Francis, the CPA’s economist, also warned that with the “double whammy” of the lack of new housing, which is the main market for bricks, and the pressure of rising energy prices, the situation is set to worsen during the second quarter.

Brick manufacturers across the country are being forced to axe staff and cut production as a result of the squeeze and trade bodies say there is anecdotal evidence that some plants are considering introducing three-day weeks.

Last month, Hanson UK, the largest producer of clay bricks in the country, halted production at its Caernarfon brickworks plant, the fourth brickworks it has closed in 18 months, with the loss of 50 jobs. The company hopes to resume production when the market picks up.

It is unlikely that we will see much improvement in the short term

Hanson UK Spokesperson

The decision followed the closure of Hanson’s Stewartby plant in Bedfordshire earlier this year, where 230 people lost their jobs. The group also closed two plants in Ripley, Derbyshire, and Southend-on-Sea.

A spokesperson for Hanson UK said: “Times have been difficult since the beginning of the year, driven by a significant reduction in housing starts. The credit crunch that we are experiencing is a direct influencing factor and it is unlikely that we will see much improvement in the short term.”

The CPA’s Francis said: “Housebuilders appear to be finishing work that was started before the first quarter of this year, but as the lack of new housebuilding starts feeds through, deliveries are expected to be worse in the second quarter.”

He added: “It’s not looking good for brick manufacturers. They are caught in a double whammy of fast-rising energy and raw materials costs, and a sharp fall in demand. Based on current data, which shows a 28% fall in housebuilding starts for the first quarter, we’re looking at about 137,000 starts for this year across the UK, compared with 193,000 last year. That’s a very big drop and brick manufacturers are badly affected by it.”

A spokesperson for the Brick Development Association said: “The industry is facing a tough time. Most manufacturers have large stock levels at the moment with bricks sitting in yards because of the fall in demand.

Manufacturers have large stock levels sitting in yards due
to fall in demand

Spokesperson, BDA

We have to ride out the storm right now.”

One bit of good news may be that the latest snapshot of the mortgage market from the British Bankers’ Association revealed mortgage approvals were up 9% in April compared with March. Although the increase is low in comparison to the same time last year, some commentators believe the rise could herald the start of a correction after months of turmoil in financial markets.