Rising uncertainty in the UK tropical wood market

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The UK has been the largest single destination for tropical wood imports into the EU. The focus on direct imports also underestimates the influence of the UK since a proportion of sawnwood imported by Belgium and the Netherlands from Africa is also sold into the UK after kiln drying on the continent.

The UK market for tropical hardwood remained more resilient than many expected in the second half of 2016, despite the uncertainty caused by the Brexit vote in June 2016 which led a 15% fall in the value of the British pound against the dollar in the third quarter of the year.

However, concerns are now mounting about economic conditions in the UK. The UK economy was the worst performer in the EU in the opening months of 2017 as the Brexit vote at last began to take its toll. With economic growth of just 0.2% in the first three months of this year, the UK was well behind its European neighbours (growth for the whole of the EU was 0.6% in the first quarter).

The latest British Woodworking Federation survey of joinery activity in the U.K. reinforces this picture of subdued demand. The survey shows slowing growth and tightening margins in this sector during the first quarter of 2017. The weakness of the British pound and associated rising inflation are identified as dampening factors. While stair manufacturers had a good quarter, manufacturers of internal and external doors had more mixed results.

Recent business surveys suggest the UK economy picked up some momentum in the second quarter after its slow start to 2017. But with higher inflation weighing on consumer spending, most forecasters expect growth to be lackluster during the rest of 2017. The snap election called for June 2017, which led unexpectedly to a hung parliament and undermined the authority of the current Conservative government, has only served to increase the uncertainty.

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