Instability In Europe and its impact on the Home Improvement Industry

Europe, and to a wider extent the whole world, is experiencing instability to a degree not seen for generations. ¡Keep reading!

At the 2nd Virtual DIY-Summit in September Reinhard Wolff, President of HIMA & Managing Partner of wolfcraft, stated “we are in a multi-crises situation”. Europe, and to a wider extent the whole world, is experiencing instability to a degree not seen for generations. This instability is impacting the daily life of every person on the planet; from rising prices, shortage of raw materials, energy shortages, supply chain issues, employment issues… the uncertainties are countless. How are these impacting the home improvement industry, and what can we expect for the future?

How is the worrying inflation threatening Europe_

What are Europe’s main problems?

Instability grows as a result of a factor being likely to change, especially unexpectedly, and this in turn can led to a crisis. There are arguably four predominant instability factors taking place in Europe currently. These being:

  1. The negative impact of the Ukrainian war on the European Union – The largest-scale land war in Europe since at least the Balkan wars of the 1990s has driven several million refugees to seek asylum and is having a huge effect on the European Economy in 2022.
  2. Energy crisis – A knock-on effect of the War in Ukraine is the energy crisis seen acutely in Europe and globally. The resulting rise in energy prices, and even the possibility of scheduled blackouts across some countries, has caused a high degree of instability.
  3. Inflation – The European Union annual inflation was 10.9% in September 2022, up from 10.1% in August. In comparison, 2021 the EU saw an average inflation of 2.9%. The USA is also seeing inflation over 8%, Australia at 7.3% and Brazil at 7.17%.
  4. Labour shortages – Europe is still feeling the impact of the Covid-19 pandemic, in which millions of people were furloughed, and many didn’t return to their old jobs. The precarious employment situation is especially apart in Spain, with unemployment at 12.67% in Q3, the highest unemployment rate in Europe.

Impact on the home improvement industry

Impact on the home improvement industry

Of course, these instabilities are having an impact on the home improvement industry. Perhaps most notably is that the war in Ukraine has already led to some of the leading retailers, such as OBI and IKEA, closing or selling their stores in Russia, as well as many retailers no longer accepting goods manufactured in Russia, even if these are not currently under sanctions. This is having a particularly strong impact on the timber industry, as Russia’s share of the global softwood lumber trade previously stood at roughly 22%. This number has decreased dramatically since the outbreak of the war.

The energy crisis threatens the unity of Europe

Furthermore, the energy crisis is having a dramatic impact on the manufacturing of products. The ceramic and brick industry have already closed manufacturing facilities due to the rise in the cost of energy in Europe and the high energy demand for these product categories. The energy independence of Europe is now extremely high on the EU agenda as the cost of the energy crisis impacts every European country.

The energy crisis threatens the unity of Europe

How is the worrying inflation threatening Europe?

On top of the instability caused by the war in Ukraine, and the energy crisis, inflation in Europe 2022 is having the expected result of customers not spending on home improvement and DIY as real earnings decrease. It has been found that more consumers are backing away from and/or trading down on purchases as elevated core inflation continues to strain household budgets. This is corroborated in the Q3 trading update that was recently published by Swedish home improvement retailer, Byggmax, that stated “sales decreased for products related to larger investments in the home, e.g., green houses, pools and conservatories, while [Byggmax] in the quarter set new sales records for products related to smaller projects, e.g., garden, flooring and storage”.

Lack of skilled labor in Europe

Labour shortages and instability in the work force are also having an impact on the home improvement sector. Younger generations are demanding more flexible working conditions. This is having a particularly strong impact on the service industry. In response to this we have seen a number of stakeholders promoting flexibility in the working calendar. For example, European retailer Hornbach have offered employees in Germany the possibility to reduce, redistribute or increase their own working hours.

Europe has been experiencing dramatic instability in the last few months. The outbreak of the war earlier in the year, following the Covid-19 pandemic, and the knock-on effects on energy supply and inflation, are all impacting the manufacture and sale of products in the home improvement, DIY and garden industry. Most forecast difficult periods ahead, especially in comparison to 2020 and 2021 and the record market value reached in these times.

Further to this, this instability is likely to continue until the end of the year, and even longer if the war continues in the same vein as today.

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