Cautious optimism as we enter a new era

In July, BHETA published its latest popular Quarterly Market Report which coincided pretty much with the General Election result, so the association finds itself in a perfect position to look – in parallel - at the long-term trends as well as any politically driven changes likely to affect our sectors.Just to qualify the role of the BHETA Quarterly Economic Report in this context, it is a comprehensive analysis pulling together multiple sources of data on the home improvement, DIY, housewares, garden, and small domestic appliances sectors, which BHETA makes freely available to both supplier members and sector retailers. So, the following analysis is based on high quality business trend analysis - plus opinion following the Labour victory. And the conclusion is cautious optimism, after a subdued start to the calendar year.The first quarter of 2024 was a tough one, with DIY more or less flatlining, as the boost from Easter falling in March instead of April was lower than expected due to the poor weather experienced during the month and over the key Easter weekend.Predictions for the full year look somewhat more positive, however. UK retail spending growth is forecast by GlobalData to slow to 1.6% in 2024, with volumes forecast to continue falling in 2024, but at a much slower rate (0.5%). In addition, real earnings growth, combined with the further cut to National Insurance are creating a more supportive context for discretionary spending and we expect spend growth to improve throughout the year.DIY & gardening is expected to grow by 1.5% in 2024 as the housing market begins to recover and as consumer spending power improves, boosting demand for DIY. Shoppers are becoming more open to make investment in home improvements if they are relatively low budget. They are going to remain wary of big-ticket spending in the category for some time yet, however.Retailer results reflect the overall picture. Kingfisher reported a business growth of 2.7% for the three months ending on April 30, 2024, primarily driven by trade. Screwfix sales increased by 6.4%, with a 2.4% like-for-like increase. This success is attributed to new store openings, gains in tools and hardware and building and joinery, and investments in online offerings like Screwfix Sprint and the mobile app. B&Q's sales grew by 0.4% and the investment in B&Q's e-commerce platform has boosted its marketplace, with e-commerce sales penetration increasing to 13.6% from 11.4% in the previous year.Specific opportunitiesWhile unspectacular, the forecasts for 2024 as whole are at least positive, with the lower budget categories growing the most. Figures suggest decorative will be up by 1.8%, lightside up 1.6% and heavyside up 1.4%. Underlying these headline figures is consumer demand for quality product – meaning it works well now and it works for the long-term. The consumer is now much more informed – and therefore critical – if product falls short. They are also more qualified to judge when a project is truly DIY or requiring some DIFM help, and we will see is a return to ‘do it for me’ scenario where growth in consumer sales is easily matched by trade. The latter includes product development that is genuinely more sophisticated – such as larger format tiles and clever electric and home tech / security solutions.A new era?So, what impact will the new government have? Some of the policies announced are of course hangovers from the previous incumbents, but there are things in the King’s Speech that should be noted as different and potentially influential. For supply and retail in general it’s a mixed picture.While it's unlikely that there will be significant tax cuts for businesses, there is some likelihood of business rates reform, with a focus on helping smaller retailers in the short term. On the other hand, it seems equally likely that retailers will be impacted adversely by the banning of zero-hours contracts and the elimination of qualifying time for rights such as sick pay, parental leave, and flexible working.From a consumer demand perspective, the new Government’s intentions for the planning system and housebuilding could benefit the whole DIY and 'Do it for me' (DIFM) sector. With more stable inflation rates, heading back towards the Bank of England’s 2% target, consumers shopping for essential and non-essential products have begun to switch back to previous shopping habits. An encouraging statistic for home improvement is that the proportion of consumers switching to brands they bought before the cost-of-living crisis increased versus last month, up 0.8ppts to 9.0% for nonessentials.Overall, it’s not exactly going to be a boom for DIY, but we have a more engaged, wider, and now savvier audience, and some macro economics which suggest positive possibilities for the sector.BHETA provides a valuable resource for companies right across the home and garden industry in its broadest sense. From retailer meetings to data to lobbying, BHETA can really deliver. For more information, contact the BHETA Member Services team on 0121 237 1130 or visit the BHETA website www.bheta.co.uk.