The UK Ceramic Tiles Market is relatively fragmented in terms of end-use sectors, and is characterised by a growing level of imports and a declining UK manufacturing base in 2004.
The total market in 2003 is estimated at approximately ?390m at manufacturers selling prices, reflecting an increase of around 6% over the 2002 market size of ?370 million, with steady underlying growth sustained in recent years.
The UK Ceramic Tiles market continues to offer reasonably strong opportunities in terms of value growth in 2003 and 2004, with the overall market having experienced over 25% growth between 1998-2003, though volume growth has been even higher.
Within the contract sector, improving business confidence and sustained commercial activity growth throughout the UK has continued to stimulate the market for ceramic tiles, with sectors such as health and leisure facilities offering particularly strong growth opportunities during 2003. In addition, indications are that the hotel market has also generated more demand for tiles over the last 12-18 months, following a downturn in capital expenditure in this sector during 2001/2.
Within the housebuilding sector, new build levels are slowly increasing with 2004 activity forecast to reach just under 158,000 new units in the private sector and just under 180,000 in total, including social housing. This is likely to continue to stimulate continued demand for tiles and tiling products, particularly as the trend towards downstairs cloakrooms and utility rooms in new houses continues.
While the new build market has remained relatively flat in recent years, private sector RMI has been very buoyant. The bathroom/shower and kitchen refurbishment sectors have also been buoyant, with ceramic tiles benefiting from high activity levels.
In addition to key end use sectors stimulating market growth, there has also been significant activity within certain key distribution channels, particularly multiple tiling retailers, who, with strong marketing activity and a focus on these products, have continued to stimulate volume demand. Despite the fact that these retailers are increasingly supplying imported products at lower prices, volume development has been such that value growth remains significant in the market. As a result, larger specialist multiple retailers have experienced significant growth, albeit possibly at the expense of the UK manufacturing base.
Other factors contributing to the healthy performance of the market include TV/media influence, growth of conservatories and en-suites and the continued growth of the laminate and wood flooring market. Indications are that these products act as a catalyst for tiles, continuing the hard surfaced flooring theme where wooden flooring is less appropriate in areas such as bathrooms, cloakrooms etc.
Indications are that underfloor heating has also generated some growth opportunities in the tiles market, with developments in this sector likely to continue to stimulate installation of tiles where previously comfort issues may have prevented this. Growth in the conservatory market is also linked to the healthy growth in the ceramic tiles sector, with installations rising to an estimated 235,000 units in 2003, reflecting 20% growth by volume over 2001. The use of underfloor heating in conservatories is indicated to be stimulating the ceramic tiles market, increasing the opportunity to make greater use of the room in the winter, as well as the summer. Recent product developments in the underfloor heating sector have offered opportunities to use this system of heating as full comfort heating, rather than merely providing a background heat, furthering adding to the flexibility of conservatories.
In terms of supply, continued product developments from manufacturers have also continued to generate growth opportunities. New designs, size, materials and shapes, coupled with increased availability of these products through specialist multiples, have contributed to reasonably healthy value growth and continued strong performance in volume terms during 2003 and H1 2004.
In terms of future prospects, indications are that the non-domestic sector will continue to stimulate the market, particularly in commercial sectors such as leisure and hotels. In addition, recent commitments in terms of spending on health and education from the current government, and a focus on debating public sector spending in the run up to the General Election in 2005, is likely to continue to result in rising refurbishment and new build development. As such, future prospects for the ceramic tiles market in commercial and public sectors are positive, in the short to medium term, though could change if there is a change in Government at the next election.
Within the domestic sector, new build levels are likely to continue to rise, albeit at a relatively slow pace, underpinning market development in this sector. However, recent interest rate rises and suggestions of a slowing housing market may dampen this growth to some extent. Nevertheless, within the refurbishment sector of the domestic market, indications are that householders are likely to continue to stimulate volume growth, particularly given penetration levels for tiles remains low compared to most other European countries. Emphasis from media such as home improvement television and consumer magazines on tiling is also likely to boost the refurbishment sector within the domestic market over the short to medium term.
Despite healthy optimism for the ceramic wall tiles market in the short to medium term, the threat of substitute products is indicated to be increasing. Products such as uPVC panelling systems for bathrooms which are typically cheaper and faster to install are likely to impact on the commercial tiles market to an extent, although references to a less luxurious finish may dampen this products growth in the longer term, particularly in the higher value hotel sector.
The key benefits of ceramic tiles include durability, a low level of maintenance, ease of cleaning, impervious to water and fire-retardant. Increasing emphasis on health and safety issues by specifiers and end-users is also having a major impact, to the benefit of ceramic tiles which are regarded as hygienic.
In terms of supply and distribution, the market continues to be characterised by the strength of the import sector, dominated by companies such as Porcelanosa. The dominance and strength of this channel was recently exhibited with the purchase by Surface Coatings of the UK manufacturer, Pilkingtons Tiles Group, which was purchased for ?3.1 million, including the assumption of debt. Success in the UK manufacturing sector remains mixed with H&R Johnson experiencing difficult market conditions whilst another UK manufacturer, BCT have experienced growth. However, pressure on margins and profit levels remains particularly strong for these companies, reflecting the highly competitive nature of the market.
In summary, indications are that the ceramic tiles market will continue to exhibit reasonably healthy value growth in the short to medium term, supported by strong volume demand from a number of key end use sectors. Between 2003-2007, it is estimated that the market will experience growth of around 18%, reaching a value of some ?450 million MSP.
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