What the new energy price cap means for the home improvement sector
Roy Frost, Managing Director, Listers, reflects on what impact today's announcement from Ofgem that the energy price cap will rise to ￡3,549, is likely to have on the window and door retail sector.
We learnt today that we were all going to be a little less well off. Ofgem confirmed that the raising of the energy price cap will push average household energy bills to ￡3,549. To put that into context that’s around an 80% increase on what we were paying in April this year.?
Lower income households are at crisis point
I’m going to come to the impact on business, and our industry specifically in a moment, but I want to start by saying that for lower income households, this is a genuine crisis point, people are stretched as it is – they can’t simply afford to absorb more increases and Government needs to act.
We’re doing what we can, we committed to ￡1,000 cost-of-living-allowance for our non-managerial team members in June. That, however, is a short-term fix. We need government and Ofgem as the energy regulator, to get a grip long term. Wholesale energy prices show no sign of falling, and that is placing many households under extreme pressure.?
Google searches relating to home energy efficiency are sky rocketing
The flip side of this is that energy efficiency is at the top of the political and social agenda in a way that it never has been previously, and it represents a massive opportunity for the window and door industry.
You may not know much about Google trends but as a simple definition, it tracks interest in a particular search term over time, scoring ‘interest’ in a particular search term out of a maximum of 100.?
In the last two weeks of August, searches for??‘replacement windows and doors’ have been sitting at ‘100’ – the highest level it has been at any point this year. The last time it was there? March, just a few days before the energy price cap was last raised in April!
Searches for ‘home energy efficiency’ are also approaching a year-long high at ‘98’, while ‘double-glazing’ is also climbing.?
Energy price increases and inflation don't impact us all equally
While a lot of people are simply wondering how they are going to make rent, others - those who can afford to – are exploring ways to lower their energy bills, long term.?
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It’s also worth reflecting for a moment on the fact that while house price inflation is slowing, the number of transactions remain at historically high levels.?
Seasonally adjusted figures for July, for example put the number of residential transactions up almost 37% up on the same time in 2021 and 3.2% higher than June 2022, at more than 104,000 purchases. They are people who have bought houses in need of reservation, houses with windows that they just don’t like.
It is tough for a lot of people – but there are others who have the cash in reserve to continue to spend, to continue to make home improvements.?
It’s about the right product offer and marketing it effectively. In retail very simply it has to be about energy efficiency. If you can’t tick that box, you’re not going to get a foot in the door.?
People who will continue to invest, want premium products
It’s also about ‘premium’ - because higher end products are those that appeal to the group in our society who have cash to spend.?
Our range of Sheerline doors, bi-folds, windows; Residence Collection R9 and R7; our Timeless heritage window - they deliver on energy efficiency and aesthetics. We’re also committed to supporting our customers in marketing them effectively through our dedicated customer support programme.?
What we can expect in the months ahead
I don’t believe we can count on Government support in the near future. Government grants for energy efficient home improvements would be an obvious step, but that is unlikely in immediate term given the change of leadership that we have just seen.
So for us, for our customers and the wider industry, it’s about digging in, working that little bit harder and making sure that we maximise the opportunities that increased homeowner awareness of energy prices delivers, while also doing what we can to support our people through what is a difficult time for many.