Country Profiles

Access to latest commentary on timber industries and economies of EU&UK and VPA partner countries

KEY EU COUNTRY

UNITED KINGDOM

General Economic Trend

In 2020 the UK was one of the hardest hit G20 economies by the COVID-19 pandemic. It suffered one of the highest per capita death rates from the disease and its economy was among the most severely impacted. Late 2020, the UK treasury and leading analysts forecast the economy contracting 11% plus through the year. The OECD predicted it would also take longer than most to recover, forecasting that at the end of 2021 GDP would still be 6.4% lower than in 2019.

At the same time British business has had to contend with the practical issues and economic fallout of the UK leaving the EU. Importers, including timber companies, were concerned about cargoes being held up at ports by new customs procedures introduced as a result on January 1 2021. Timber importers have also had to adapt to undertaking legality risk assessment on all timber from the EU under the UK Timber Regulation (UKTR), which replaced the EUTR in UK law. The Office for Budget Responsibility, meanwhile, predicted that the end of frictionless trade with the EU would have a long-term drag on UK productivity of 4% – a forecast it stood by in March 2021.

However, according to latest economic commentary and forecasts, the picture for the UK is now less bleak. It’s economy shrank by less than expected in 2020 at 9.8%, and despite a fall in GDP of 2.2% in January 2021, the impact of further lockdown measures on trade and industry was also less than anticipated. With one of the most swiftly rolled out COVID vaccination programmes in the world, the subsequent opening up of the economy, with most lockdown constraints set to be lifted in May/June, and the positive impact this is having on consumer confidence, forecasts for economic recovery and growth have been upgraded.

Timber Industry

Construction

Construction is the leading UK timber consumer, accounting for an estimated 74% of all sales. It also influences demand for a ‘long tail’ of other products, notably furniture and joinery in both hardwood and softwood. One of the leading sources of UK industry data, the Construction Products Association (CPA), forecast that the combined impact of COVID-19 and supply disruption resulting from Brexit would be 14.5% overall contraction of the sector in 2020. Housing would be worst affected, with output down 20.6%, followed by infrastructure and commercial down 15.3% and repair and maintenance 13%.

However, as with reports for the wider UK economy, predictions for construction have been revised upwards due to the industry proving more resilient in the pandemic than expected and rising economic confidence. According to the CPA’s Construction Industry Forecasts 2021-23, the building sector contracted less last year than anticipated. In 2021, total construction activity is forecast to grow 12.9%, followed by 5.2% in 2022 and 2.8% in 2023. Infrastructure work will grow fastest in 2021 at 29%. But housing and housing repair, maintenance and improvement (RMI) are expected to expand rapidly too. RMI is reported to be continuing to benefit from householders deciding to upgrade their properties or convert them to a live-work space as they’re spending so much time at home in lockdown and furlough or anticipating more home working to become a permanent fixture post COVID. Private sector RMI is forecast to grow 12% this year, while public sector RMI output is predicted to grow 15%, additionally driven by new regulations on fire safety.

Less positively, the CPA forecasts that commercial construction recovery will be more muted due to increased long-term home-working. It also sees ongoing supply constraints in the form of longer lead times and rising costs of vital materials, including timber.

Joinery

According to an early 2021 TTJ report on the UK joinery sector, most manufacturers closed when the first pandemic lockdown was implemented in March 2020. However, some only shut for a matter of weeks. Most also reported that demand recovered strongly as from late May/June, attributing this to a large extent to the lockdown consumer boom in DIY and RMI. Reflecting their confidence, companies polled had continued to develop new products and invest in new technology to boost capacity and efficiency. Their major concern was that high timber prices and availability problems in certain species would slow recovery. They also attributed these to rising global demand for wood and suppliers constrained from raising output in line with demand by COVID safe work practices.

Tropical Timber Imports & Trade

Prior to the pandemic, UK tropical timber imports had been rising; up from $1.07 billion in 2015 to $1.23 billion in 2019. But COVID-19 had a major impact across the hardwood trade as a whole. According to reports in the UK trade magazine Timber Trades Journal (TTJ) at the lowest point of the initial lockdown from March through April, some importers were down to 35-40% of normal trade levels. This was reflected in IMM analysis of UK customs data (HMRC), which showed total tropical timber (HS44) and tropical wood furniture (HS94) imports in the first nine months of 2020 down 27% compared to the same period in 2019 at $697 million. However, later in the year, timber and plywood importers were quoted in the TTJ saying they forecast their turnovers for the year to be between 10% and 20% down on 2019 overall. Demand, they reported had recovered strongly when the initial lockdown was relaxed, and was less affected by second and third pandemic wave restrictions. Some saw sales hit record monthly totals. Demand drivers were reported as a recovering construction sector and particularly a boom in demand from DIY and home improvement and refurbishment sectors.

The recovery was seen in HMRC figures, with tropical timber (HS44) imports rising from $24 million in June 2020, to $42 million in September and monthly tropical wood furniture imports up from $24.5 million in May to $55.3 million in September.
In the latest TTJ hardwood market summary early 2021, importers report demand continuing to grow, but also significant issues with rising prices and availability across tropical and temperate timber due to rising global demand and pandemic controls curbing production. Most problematic was supply from North America, but all hardwood sources were affected to a greater or lesser extent. In particular, African lead times were reported to be significantly extended due to COVID safe work practices limiting mills’ output, and also less availability in latest harvest cycles of sapele, the UK’s lead tropical species. Asian supply was additionally affected by soaring freight rates, with importers reporting rates quoted for containers out of Indonesia up to $16,000 early 2021, compared to $1,500-$2000 six months before.

Trade with VPA Partner Countries

Overview

The UK’s imports of tropical timber products (HS44) and wood furniture from VPA partner countries fell 22% through the pandemic, from €883.6 million in 2019, to €686.7 million in 2020. However, this still leaves the country as the biggest European timber trader with these suppliers. The next largest, the Netherlands, imported €449.6 million in 2020.
The UK mostly imports general/other furniture followed by joinery, seating, plywood and mouldings from Asian VPA countries.
Where business with the African VPA partners is concerned, importers consider the UK a more conservative market than its European neighbours in terms of tropical species. The bulk of sales comprise sapele, sipo, iroko, ekki, framire to a diminishing degree, wawa, wenge, dark red meranti, keruing, yellow balau and bangkirai decking, merbau, ipe, greenheart, plus jatoba, massaranduba, garapa and cumaru. Other varieties do sell, but in limited quantities and, say importers, it is a challenge to persuade end-users to try secondary or lesser-known species, despite environmental arguments in their favour.
The UK’s lead product from African VPA suppliers by some way is sawn timber, followed by logs, joinery, furniture and mouldings.
From Honduras and Guyana imports are dominated by sawnwood, in very small volumes.

UK – VPA partner country trade January-December 2020 (in €)
Source: IMM Data Dashboard

Trade with Top 5 VPA Partners

UK trade with its top five VPA timber trade partners all contracted in May, when its lockdown rules were at their most rigorous. But, with some fluctuation, all showed improvement over following months as restrictions were relaxed, although, in December, while those from Cameroon were climbing, imports from Vietnam, Malaysia, Indonesia and Thailand showed some decline.

UK – top 5 VPA partner trade 2019-2020
(3 month rolling averages; HS44, HS47, HS48, and HS94 products)
Source: IMM Data Dashboard
UK – top 5 VPA partner trade 2019-2020
(HS44, HS47, HS48, and HS94 products)
Source: IMM Data Dashboard

Viet Nam

The 2020 downturn in UK imports from Viet Nam was longer lasting and more pronounced than decline in Viet Nam’s exports to the other key EU countries monitored by the IMM, as the UK was particularly hard hit during the first wave of the pandemic and the market faced added uncertainties due to Brexit. Total UK imports of HS44 and HS94 products from Vietnam declined by 25.9% from €348.1 million in 2019 to €257.6 million in 2020.

In spite of this sharp fall, the UK remains by far the most important market for timber products and furniture from Viet Nam among the EU27+UK.

More than 80% of UK imports from Viet Nam in 2020 were accounted for by general furniture. Imports in this category dropped by around 30% from €300 to €212 million. UK imports of the other four leading timber product categories sourced from Viet Nam, seating furniture, joinery, paper and table ware, were stable or saw only minor decreases.

In 2020 the EU and Viet Nam signed a free trade agreement. This affects a limited number of timber export product categories, but was predicted by Vietnamese politicians to give their wood sector a boost, nevertheless. But reservations about this were raised due to the UK, as Viet Nam’s leading European timber trading partner, leaving the EU on December 31 2020. The UK Department for International Trade, however, told the IMM that UK and Vietnamese governments were ‘working together to replicate the effects of the EU-Viet Nam FTA to ensure continuity for UK businesses’.

UK – Viet Nam trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard
UK – Viet Nam trade 2019-2020
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Indonesia

Contraction in UK imports of the top five timber products it sources from Indonesia followed a more staggered pattern than that for its trade with Malaysia and Viet Nam. Wood joinery’s biggest fall was from March to June, down from €9.2 million to €4.6 million, while general furniture fell from €3.461 million in March to reach its 2020 low point in May of €1.4 million and plywood trade was at its monthly lowest of €784,000 in August. All categories saw recovery in Q3, but UK imports of all apart from plywood were heading down at the year end.

Total UK imports of HS44 and HS94 products from Indonesia dropped 23.8% from €217.9 million in 2019 to €165.9 million in 2020.

UK – Indonesia trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard
UK – Indonesia trade 2019-2020
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Malaysia

UK imports of four out of the five main timber commodities it sources from Malaysia hit their low point of the year in May, into the UK’s second month in lockdown. Seating reached its lowest level in June. Steepest declines were in general furniture, down from €8.9 million in March to €2.1 million in May, and joinery down from €4.9 million to €424,000 in the same period. Trade in all five categories recovered for the next five months, but all bar plywood tailed off towards the year end, with general furniture and joinery falling away particularly sharply with the UK back in lockdown.

Total UK imports of HS44 and HS94 products from Malaysia dropped 15.5% from €226.1 million in 2019 to 190.952 million in 2020.

UK – Malaysia trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard
UK – Malaysia trade 2019-2020
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Thailand

After rising in Q1 2020, UK imports of the five leading timber products sourced from Thailand all declined over the next two months as pandemic lockdown impacted. Seating furniture, the largest of the categories imported by the UK, fell most steeply, down from a peak of €3.8 million in March to €1.1 million in May. Percentage-wise, general furniture also contracted sharply, down from €574,000 to €95,000 over the same two months. Q3 saw general recovery in trade, but while plywood and general furniture were heading up at the year end, the other lead categories weakened in Q4.

Total UK HS44 and HS94 imports from Thailand fell 20.5% from €44.1 in 2019 to €35.1 in 2020.

UK – Thailand trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard
UK – Thailand trade 2019-2020
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Cameroon

After rising through Q3 to €1.9 million in March, UK imports of sawnwood from Cameroon, the main timber product it sources from the country, contracted to €796,000 in May. Trade then followed an erratic pattern through the year, recovering to peak at €3.9 million in October before contracting to around €1 million in November then rising back up to €1.8 million in December. For the year, UK Cameroonian sawnwood imports were up 18% at €21.6 million. Trade in the other four lead timber products imported by the UK was relatively stable but at overall lower levels than in 2019. Importers reported that Cameroonian logistics had improved during the year, with the new port of Kribi handling more cargo and taking pressure off the congested port of Douala. However, the cost of storage and other services at the latter remained very high.

Total UK HS44 and HS94 imports from Cameroon were up 17.2% from €18.8 million in 2019 to €22.1 million in 2020.

UK – Cameroon trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard
UK – Cameroon trade 2019-2020
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Perception of FLEGT

Recognition that FLEGT-licensed timber meets EUTR and needs no further Due Diligence

Most – 90% – of survey respondents said that FLEGT licensing made importing from Indonesia easier and 47% agreed with the proposition that they would give preference to FLEGT licensed products over equivalent unlicensed. Most though – 69% fully or partially – agreed that they would give preference to certified sustainable timber over FLEGT-licensed.

Half of respondents also agreed that FLEGT currently only means legal and has nothing to offer in terms of sustainability. However, 69% believed to some degree it should be considered as evidence of sustainability in timber procurement policy. The UK TTF also strongly promotes FLEGT licensing as evidence of legality and sustainability and there are calls for the UK government to make it clearer that it accepts licensing as proof of both in its procurement policy.

In 2020, the UK Competent Authority, the Office for Product Safety and Standards, processed around 300 FLEGT licences a month, with the number increasing through the year as COVID-19 lockdown restrictions were relaxed.
To give the initiative greater market profile and traction, UK importers and traders say more VPA countries need to start licensing, so increasing the volume and variety of licensed goods. They also want to see more EU countries acknowledging FLEGT as proof of legality and sustainability in government procurement policies to help drive awareness and increase the credibility of the initiative overall.

To drive market uptake of due diligence-exempt FLEGT-licensed goods and incentivize supplier countries to complete their VPA process and start licensing, UK companies also urge uniform rigorous application of the EUTR EU-wide. Due to the pandemic, the UK CA only undertook 20 UKTR company checks in 2020 under the EUTR and issued just six notices of remedial action, but the general perception is that, in normal circumstances, its risk-based enforcement approach is well targeted, thorough and effective. There are, however, UK concerns that the EUTR is not so strictly enforced in some EU states. This, they say, weakens Europe’s reputation on timber legality generally and undermining the FLEGT initiative. At the end of the UK’s transition period for leaving the EU on December 31 2020, the EUTR was replaced in UK law by the UK Timber Regulation. 

UK timber companies see the future of tropical timber as challenging, given growing competition from timber and non-timber alternatives and its continued popular association with tropical deforestation, now increasingly strongly linked with the climate crisis. But, they maintain, with effective communication of a sustainable tropical timber trade as part of the solution to maintaining the forest, it can benefit from growing environmental concern and awareness of the global need to move to a low carbon, sustainable circular bioeconomic model. Given added momentum, including by effective promotion and EU/UKTR enforcement, say UK timber companies, FLEGT can be part of that process.

How aware are you of the FLEGT VPA process and what it involves? (n=15)

%

Fully aware

%

Partially aware

%

Totally unaware

EUTR and FLEGT Licenses post-Brexit

All except one respondent to the IMM 2020 UK report survey were fully behind assimilation into UK post-Brexit law of FLEGT regulation and the EUTR (becoming the UKTR). This particular importer saw more benefit in backing greater uptake of third party certification, possibly through tax or import tariff breaks, than the UK continuing to back FLEGT.

The rest, however, thought radically altering or dropping the regulations would be disruptive and send out the wrong message on the UK timber trade’s commitment to legality and sustainability.

This in spite of the fact that adapting to the UKTR is expected to cause some structural change in the sector. It obliges all UK companies to undertake due diligence on timber and wood products imported from the EU, including FLEGT-licensed products imported by an EU country and reexported to the UK. This effectively makes many more companies ‘operators’ under the terms of the regulation and some think smaller companies and intermittent importers may opt instead to buy from larger businesses’ landed stock, so remaining ‘traders’ and avoiding the added administration and risk.

There are also some concerns that EU suppliers, particularly of timber sourced from outside the EU, may be reluctant to provide UK customers with the necessary supply chain information for their due diligence. Some believe this may lead to development of larger UK importer stockholding operations. The alternative course, already taken by a leading Belgian supplier to the UK, is for EU companies to set up to a UK operating business to handle customs and due diligence processes.

Promotion of FLEGT

The UK Timber Trade Federation continues to be a keen supporter and promoter of FLEGT. Its FLEGT communication programme, which is funded by the Foreign Commonwealth and Development Office, has its own team and ran a design competition, Conversations about climate change in 2020. This challenged designers worldwide to create products and other objects in timber from FLEGT VPA countries. The aim was to raise awareness of the latter’s range of wood species and products and the environmental, social and economic benefits of the initiative. In November 2021, the TTF is running six weeks of exhibition and events in London to highlight the contribution of timber and forests on carbon and climate to coincide with COP26 UN Climate Change Conference in Glasgow in November. Forest governance and FLEGT will form a core part of the project and it will be backed with an extensive digital communication programme to reach as broad an audience as possible, including delegates at the UN conference.

At a TTF-Indonesian embassy webinar focused on timber trade and FLEGT, Minister for the Pacific and Environment Zac Goldsmith also said the government’s Global Resource Initiative task force was looking into how to reduce the climate and environmental impact of other imported commodities and that FLEGT was seen as a model. “We can learn from our timber sector experience of tackling illegal logging and deforestation, while supporting livelihoods of people in supplier countries,” he said.

Trade Awareness and Opinion of FLEGT

According to the IMM 2020 UK survey, UK timber trade awareness of FLEGT is high, with 79% of respondents saying they were fully aware of the FLEGT process and 16% partially aware.

Answers to more detailed questions indicate that knowledge of FLEGT is also becoming more in depth, with 100% of respondents, for instance, saying they were aware or partially aware that licensed products meet the requirements of a range of Indonesian laws, including on labour and community rights, environment and forest management. That compared with 86% in 2019. The proportion that were aware a FLEGT licence requires all parties in the supply chain to be covered by a legality or sustainable forest management certificate was also up, from 86% to 95%.

 

Chart: survey results in UK