In Q1 2020, installers already saw declining turnover
Only a short time ago, in Q4 2019, there were still more installation companies with growing turnover than companies with declining turnover when compared to the same quarter in 2018. In Q4 2019, the expectations for Q1 2020 were quite tempered, but still positive.
The actual Q1 2020 results showed that more companies in Germany, Poland, the Netherlands, and the UK are reporting a declining turnover than an increasing turnover.
Expectations for Q2 and for 2020 are pessimistic.
The forecasts for Q2 2020 are quite gloomy; on average, 6% of the installation companies expect their turnover to increase versus 66% who foresee a decrease. UK installers are the most negative, as 85% expect a decline in turnover for Q2 2020.
The COVID-19 pandemic is expected to have serious consequences not only for Q2, but for 2020 turnover in general. The large majority of installation companies around Europe (86%) expect that the actual turnover in 2020 will be an average of 32% lower than the initially budgeted turnover. Polish and UK installers predict the highest turnover decline – 46% and 36% respectively.
Smaller companies (up to 5 full time employees) are more pessimistic and expect the negative effect on their turnover to be even bigger.
Order books are also declining
Since Q4 2019, the order books of the European installation sector have shrunk by an average of 1.5 months. Installers in the UK (-2.8 months) and France (-2.3 months) are showing the biggest drops in their order books from Q4 2019 to Q1 2020. A comparison between Q1 2019 and Q1 2020 shows that European installation companies had on average of 1.1 months smaller order books than a year ago.
The Polish and Dutch companies can keep their current staff working the longest – around 6 months. In Germany, France, and the UK, the order books are between 3.4 and 3.6 months.
Installers sentiment is negative, but the reality may be less gloomy than they expect
It should be noted that this survey was conducted during the time when many countries were at the beginning of their lock down period. Therefore, the negative sentiment among installers is logical and the expectations they had during the survey may change in the coming period when some of the countries start loosening their safety measures.
The construction sector itself is late cyclical; this means that the construction and installation companies will feel the impact of the corona crisis later than the other players in the market. Although the impact of COVID-19 on the construction sector will be inevitable, whether the drop in turnover and work for plumbers and HVAC installers is significant will need to be regularly monitored and measured. We still believe that the demand for sustainability, energy efficiency, and the shift towards fossil-free installations will be among the major drivers for the sector.