Shares in British brickmakers have reached their lowest levels in over a decade, but the recent announcement of the government’s Your First Home scheme has sparked renewed interest in the sector. Industry observers note that brick manufacturers tend to benefit significantly when construction activity picks up, and the sector has attracted notable institutional investors.

The Your First Home initiative is aimed at increasing the financial support available to first-time buyers, which many analysts see as a potential catalyst for revitalizing demand in the housing market. While the construction industry is ready to ramp up—with planning permissions secured and show homes already built—consumer demand remains the critical missing component.

Domestic brick production currently stands at roughly 1.5 billion units annually, about 30% below the more typical output of over two billion. Forecasts for the coming year suggest that growth in new housing and home extensions could double current levels, underscoring a potential recovery opportunity for brickmakers.

Survival amid subdued demand has been a key concern, yet the four leading brick producers—Forterra, Ibstock, Marshalls, and Michelmersh—remain profitable and cash-generative, continuing to pay dividends despite depressed share prices. Forterra, formerly part of Hanson, reported net debt of £75 million by the end of June, slightly up from £69 million the previous year, but has secured a £170 million borrowing facility through 2030. Its management has maintained confidence with a £20 million share buyback and ongoing dividend payments.

Ibstock, following a 2015 management buyout supported by Bain Capital, carries higher net debt at £151 million, up from £145 million, but much of this consists of long-term, low-interest debt secured in 2021. It maintains access to an additional £125 million credit facility. The company reduced its dividend by two-thirds mid-year, yet the dividend remains in place.

Marshalls, which produces bricks alongside garden paving and roof tiles, anticipates no near-term improvement but reported profitability and an increased dividend. Its net debt decreased to £137 million, backed by a £270 million borrowing facility covering the next three years.

Michelmersh, a smaller player mainly serving the southeast, remains profitable and has maintained its dividend. Its net debt has risen to £5 million from a net cash position of £1.5 million in the previous year, with borrowing capacity of £20 million secured for two years.

Investor interest in brickmakers reflects expectations for significant upside if the housing market rebounds, with some equity holders including major asset managers like Jupiter, Lansdowne Partners, M&G, and JO Hambro. Notable individual stakeholders include developer Eric Gadsden, with a 25% stake in Michelmersh, and Jeremy Hosking, founder of Marathon Asset Management, holding about 10%.

Following an initial share price increase tied to the announcement of Andy Burnham’s updated version of the previous Help To Buy scheme, prices have since eased as further scheme details remain pending. A government budget update scheduled within the next three weeks is highly anticipated as a potential trigger for renewed market confidence.

Brickmakers have taken advantage of recent production downtimes to invest in modernizing facilities, leaving them well positioned for an eventual rebound. Forterra’s chief executive, Neil Ash, emphasized that government support, alongside mortgage rate stability and easing energy costs, will be crucial for restoring confidence in the sector.

While it is difficult to identify the market bottom, industry participants suggest the sector is closer to a recovery point than it has been in several years. The brick industry has demonstrated resilience by navigating through periods of falling demand, rising energy prices, and the global pandemic in recent years. However, companies with higher debt such as Ibstock and Marshalls are viewed as somewhat riskier, and smaller firms like Michelmersh may experience greater volatility, whereas Forterra is generally seen as offering a more balanced outlook.