Prices for harvested timber have firmed in the last 18 months providing respite for growers who had previously been hit by historically low prices. Government at all levels is grappling with the challenge of tackling climate change while protecting and indeed enhancing people's standards of living. The forest industries sector is well placed to respond to this, helping in the drive towards a 'low-carbon economy'.
BACKGROUND
The UK forestry resource is small in global terms - 2.8 Mha covering nearly 12% of the land area. It is expanding slowly but steadily with renewed interest recently in the establishment and management of productive forest. About 30% of the forest area is owned and managed by the Forestry Commission on behalf of government, and this area inclüdes a significant proportion of the productive softwood forest. The Forestry Commission has traditionally been the dominant supplier of timber to the softwood industry, but this is changing as the significant area of priváté forest established in the mid to late-20th Century is now maturing.
The industry is dominated by softwood growing and processing, in particular of sitka spruce. The totál annual harvest was 8.5 Mt (green) in 2006 and is forecast to grow until about 2020 (12 Mt) then levél off. There may be peaks and troughs in the following years, though the rates and timings of these will vary across the UK.
In the south and east of England the forest resource is predominantly hardwood. In
general hardwood sawmilling has been in decline in the UK and is now estimated at 400,0001 (green), though increasing demand for wood fuel is providing some respite for owners of broadleaved woodland. 
Processing capacity has grown steadily in the softwood sawmilling sector with the larger mills making regular investments and capturing a significant share of the increasing supply of domestic wood. In contrast deliveries of round wood to pulp mills has halved in the last decade primarily as a result of a move towards using recycled material. Wood-based panels have seen a modest reduction in round wood demand, again accompanied by greater usage of recycled wood.
In 1999 responsibility for forestry policy was devolved along with a range of other powers and responsibilities to newly established assemblies in Northern Ireland and Wales, and to a resurrected Scottish parliament. Forestry policy in England remains with the UK Government, but has been transferred from the Forestry Commission to the Environment Department. Policy towards forestry has become increasingly polarised across the UK with England paying limited attention to productive forestry while the other administrations retain a varying degree of interest in supportingthe industry.
In the last 20 years the growth of the environmental movement in the UK has been particularly pronounced in the forestry sector, with environmental organisations influencing public policy away from producing timber at a time of reducing prices for harvested timber. This trend has slowed as the subsequent decline in the management, in particular, of native woodland has threatened key fauna and flora. A report by public environment agencies has flagged the importance of active management of woodland and forest for the preservation and expansion of biodiversity, and this is prompting a rethink in public policy and in environmental circles.
The emergence of climate change has brought a new dimension to forest policy as the role of forests and wood products in mitigating climate change has become clearer. There is a renewed interest in the expansion of UK forests for carbon sequestration and an appetite for the increased use of wood products to substitute for more carbon-intensive materials such as steel, concrete and plastics, and to produce renewable energy. The fást growing wood fuel markét is particularly important for the large area of under-managed hardwood forest, in England estimated at over half of the forest area -650,000 ha.
The growth of environmental interest in forestry supported the development of forest certification in the 1990S. In a typically pragmatic approach the UK chose not to 'sign up' to either Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC), and instead developed its own standard for forest certification -the UK Woodland Assurance Standard (UKWAS). UKWAS can be used in conjunction with either the FSC or PEFC schemes. The UK forestry sector is highly regulated through formai (legislation) and informál means (certification). It is estimated that 80% of harvested timber is independently certified. Public policy is interventionist by nature, with very active and influential NGOs who argue for increased regulation and one-off grants to take forests intő environmental and social management. Whereas grants for forestry in the 20th Century were targeted at economic support
there has been a rapid move towards grants for social and environmental objectives only.
This interventionist public policy and aggressive NGO lobbying is a potential threat to the sector unless it is balanced with an understandingof the economic dynamics of forest management.
ISSUES
The commonly held view at the end of the 20th Century was that there would be an oversupply of timber in Britain. Policy makers and economic development agencies acted to stimulate markets while environmental NGOs took the opportunity to lobby for the forests to be taken out of production, either through deforestation or large-scale conversion to broadleaved woodland.
In early 2007, the industry published an independent report which showed that in Scotland and northern England demand from the domestic processing sector was strong and increasing. When combined with the emerging renewable energy markét, it became clearthat instead of over-supply there was in fact greater predicted demand for timber than forecast availability. Just before this report was published the Forestry Commission in Wales announced that following a period of over-cutting they would reduce output
by over 20% prompting significant concern in the local wood processing businesses.
Almost overnight, perceptions of wood supply and demand were turnéd on their head. This was followed by significant change in international wood supply. There had been an assumption that imported timber would always be plentiful and cheap, and that this would always limit the development of the industry. This is now no longer certain as UK prices firmed in 2006 and the first half of 2007.
The current reverse in the US housing markét has taken the steam out of price rises and much now depends on other factors, such as domestic housing starts and the weather - 2007's damp summer was a blow to many in the sector. Many businesses are watching developments in central Europe where so much new processing capacity has recently come on stream and in Scandinavia where winter harvesting conditions and the impact of the rising Russian export levy will be significant.
As the renewable energy markét continues to grow there are increasing examples of significant price rises and growing challenges to secure supply of softwood round wood. The industry's response has been to lobby hard for action to help bring greater supplies of harvested timber to markét and for government to focus attention on developing markets that complement rather than compete with existing successful businesses. One example of success so far has been in Scotland where the Government is committed to increasing the rate of new planting, including productive softwoods and to stimulating supplies of wood for renewable energy.
Government desire to combat climate change offers opportunities and challenges for the industry, and indeed for countries exporting to the UK. Government is promoting low or evén zero-carbon housing, and while this approach has yet to embrace the carbon content of building materials, wood's positive carbon profilé is clearly an asset. The industry Wood for Good promotional campaign has made much of this in its promotional matériái and in educational opportunities delivered to architects and other key audiences in the construction sector.
Within the UK there is increasing recognition of the positive role that forests can make in locking up carbon through tree planting, and given the benefits of using more wood there is growing support for planting new forests that will produce future supplies of timber rather than only meet short-term social and environmental objectives. If this can be translated intő action on the ground it should support the médium to longer term development of the industry, most clearly in the softwood areas to the west and north of the UK. The hardwood sector has the potential to be a politically popular area for development, but the challenges are significant.
If the sector can successfully put across its message of being a low carbon sector then progress should follow. A report in 2005 commissioned by ConFor and the Forestry Commission estimated that the forest industries in the UK directly employed 167,000 people and generated L7.2 biliion worth of gross value added, equal to 0.7% of the UK economy. This may be small in global forestry terms, but is much larger than expected in the UK and there is scope for significant growth.

IN PRACTICE
Businesses in the sector are relatively small. Most are indigenous, with many in the sawmilling sector family-owned. There is little verticai integration and most growth is organic rather than through mergers or acquisitions.
The forest-owning sector is diverse with a wide rangé of ownerships and few large players. Forest management companies such as UPM Tilhill and Scottish Woodlands bringsome scale through services to clients who own forest, and with Euroforest they are the big players in timber harvesting alongside somé mills who undertake harvesting operations.

Sawmills vary significantly in size, with the largest diversifying into timber related joint ventures and initiatives. The largest, BSW Timber, has six sawmills across the UK and one in Latvia, producing a totál of over 700,000 m/y of sawn timber. The firm employs over 650 people in the UK and Latvia with turnover in excess of L110 million.

In collaboration with Alouette Homes of Canada which specialises in off-site manufactured timber frame homes, BSW offers off-site construction Solutions through BSW Alouette. James Jones & Sons has a core sawmilling business that operates on six sites with totál sawn production of over 320,000 m3/y. In addition it purchases about 750,000 m3 of round timber to service both its mills and other roundwood users.

Taylormade Timber and Howie Forest Products epitomise the supply and investment led growth of UK sawmills. Taylormade has quadrupled production capacity in a decade through investing in modern sawmill equipment, while retainingthe manual procedures necessary to provide an extensive rangé of bespoke timber products. Howie has recently completed a major investment to create what it bilis as the largest, most advanced mill in the UK with the capacity to process 270,000 m3/y on site.

These companies' operations are based almost entirely in north England and Scotland, reflecting the resource availability in the UK.
However, there are successful mills elsewhere such as Pontrilas Timber, which operates two mills on the Welsh-English bordér and is part of the Pontrilas Group with a packaging facility in Wales.
The panels and pulp sectors are dominated by international companies. UPM-Kymmene operates two paper mills, as well as owningthe largest harvesting company, Tilhill. It has made significant investment in on-site wood fuel energy in a successful attempt to reduce energy costs.
The wood-based panels sector includes Egger which has completed the first phase of a L110 millión investment at its plant in northern England. Its turnover of L125 million makes it a significant industry player. Alongside businesses such as Iggesund it is a major purchaser of timber.
OUTLOOK
The outlook for the industry is generally positive. Softwood mills are provingto be competitive and there is further room for expansion with the limiting factor likely to be the availability of timber. New products and markets are being actively explored, though it is likely that traditional markets will dominate for the foreseeable future. Prices for harvested softwood are much improved and with the continued growth of renewable energy this trend is likely to continue and could extend further intő hardwoods.
Renewable energy is part of the response to climate change and this is an interesting challenge for the industry. There could be impacts on the resource, for example increased incidences of drought or pests and diseases, but there is alsó good reason to promote the increased use of wood. The industry, often a target of NGOs and frequently given little attention by politicians, could well emerge as a key sector in this carbon conscious world. New thinking and new approaches to working with and supporting the sector will be required.