Residential Windows and Doors - UK - May 2015
Executive Summary 
 
“The residential windows, doors and conservatory market has returned to some buoyancy following the economic downturn and subsequent flat economy. The new construction element of the market is set for a period of strong growth as existing buoyancy is still being compared with low levels of construction. Political pressures to increase this aspect of the market will be important over the next five years. In the larger replacement sector, the varied and complex market drivers are all changing towards continued growth, but the market has materially changed as saturation of double glazing is approaching. Demand is increasingly reliant on marketing re-replacement products, either because initial installations have failed or the aesthetics of earlier replacement products have now substantially improved. Treble glazing is also becoming more popular, but remains a niche market.”
-Terry Leggett, Senior B2B Analyst

The market
The UK domestic market for doors, windows and conservatories, which had a very difficult time following the recession, has now started to show strong recovery, with growth recorded in 2013 and 2014. This partly reflects renewed buoyancy in demand from the new housing sector, though replacement activity has been the most significant factor, with consumers encouraged to invest in their houses again as strong house price inflation has returned. While there is still concern that the total market is mature and may have become saturated, this was not seen in either 2013 or 2014. However, this may reflect the release of pent-up demand after a long period of poor market demand following the recession. Low interest rates have also been a further stimulus to recent demand.

Real growth will continue to be a market feature over the next few years, but this is expected to subside as the period progresses, reflecting the greater statistical base and slowing economic development.

FIGURE 1: UK domestic market for doors, door frames, windows, window frames and conservatories, 2010-14 actual and 2015-2019 forecast
 
(£ million)
 
Source: MBD and trade estimates and forecasts

In 2015, direct sales are expected to account for 71% of the total windows market. While growth will be more moderate than in the 1990s due to the greater penetration already achieved, the sector is expected to demonstrate consistent growth over the next few years. In fact, growth of 9% is forecast in real terms. Demand prospects for windows in the builder/contract sector are stronger than in the direct sell sector in the forecast period, thanks to the further development of new construction activity, particularly in the private sector, resulting in 13% growth between 2015 and 2019.

FIGURE 2: UK domestic market for doors, door frames, windows, window frames and conservatories, by marketing channel, 2010-14 actual and 2015-2019 forecast
 
(£ million)
 
Source: MBD and trade estimates and forecasts

The market can also be segmented by product type.

FIGURE 3: Product segmentation for UK domestic market for doors, door frames, windows, window frames and conservatories, 2014
 
(% by value)
 
Source: MBD and trade estimates

There are major difference in material choices between the new construction sector (builders/contractors) and the direct sell replacement market. In the window and frames sector, PVC-u has increasingly penetrated the new construction segment and also continues to dominate replacements. In contrast, timber-framed windows are far more established in the new construction sector.

FIGURE 4: Material segmentation for UK domestic market for windows and window frames, 2014
 
(£ million)
 
Source: MBD and trade estimates

The role of PVC-u in the doors and door frames market is not as strong, reflecting the use of other composite material products:

FIGURE 5: Material segmentation for UK domestic market for doors and door frames, 2014
 
(£ million)
 
Source: MBD and trade estimates

Market factors
Demand for windows, doors and conservatories in the new construction market is mainly a function of new construction activity. Other influences do, however, also affect demand, including the size and design of properties, and use of conservatories in the new build sector. New build housing activity is a major driver for around a quarter of the market, with uptake of conservatives strong but not universal:

FIGURE 6: UK housing new build market, 2010-14 actual and 2015-2019 forecast
 
(£ billion)
 
Source: MBD and trade estimates and forecasts

The direct sell market is influenced by various complex factors, including house price inflation, house moving activity, consumer spending activity, employment security, the ability of householders to gain credit, interest rates, fuel price inflation in relation to RPI, and public sector housing policy. These factors also all impinge on housing repair and maintenance activity.

FIGURE 7: UK housing repair, maintenance and improvement market, 2010-14 actual and 2015-2019 forecast
 
(£ billion)
 
Source: MBD and trade estimates and forecasts

The initial replacement market also has less potential in the direct sell market as 85% of houses now have some form of double glazing. A few opportunities remain for initial replacement, though the market has evolved into primarily converting originally replaced windows into sales due to their failure - the typical life expectancy of early replacements is 20 years, or for aesthetic reasons, with modern technology affording more streamlined frames. This requires a different sales process, with the impetus for replacement more closely related to consumer spending on large ticket-items as purchase decisions are more easily deferred.

Companies
There was a major contraction in the number of factories producing PVC-u doors and window frames in 2009 (7%), 2010 (10%) and again in 2011 (4%), though the statistics are clouded by the inclusion of other plastic builders’ ware. A further 4% reduction was recorded in 2012 and a more modest 3% reduction in 2013. However, there was growth in 2014 for the first time in the review period.

The effects of the economic downturn on the number of companies in the timber sector appeared to worsen in 2011. There was little further change in 2012, but contraction was again evident in 2013. However, there was then significant growth in both the number of businesses and factories in 2014.

The number of businesses and factories in the metal door and window frame industry has declined in each year since 2008, when the data was revised to include PAYE-based enterprises also not registered for VAT. This steady decline continued into 2014.

What we think
The residential windows and doors sector suffered strongly in the recession and the subsequent flat economy. However, strong growth returned in 2013 and continued into 2014, with almost all of the varied factors affecting the market becoming increasingly favourable in the last two years. The prospects are now for continued growth, though this is likely to be stronger in the smaller new build sector than the replacement market in the short term. Selling the replacement of existing double glazed products has proved more difficult that converting householders with single glazing. However, the superior aesthetics of new products, combined with the failure of previously installed replacement windows, will stimulate growth in the replacement sector, as will the niche trend towards treble glazing.