The UK market for mechanical and electrical (M&E)
contracting has increased by almost 25% since 2012, following a period of
sustained growth from 2013 onwards, driven by a buoyant new build market, with rising
output in the office and infrastructure sectors in particular. This growth
continued in 2016, when the market saw growth of 4%, despite continued constrained
public sector capital spending. In 2017, growth is forecast to stagnate, as construction
output becomes more subdued.
Many factors support a continuation of market growth,
including the development of higher specification and more complex products,
changes to legislation requiring the specification of higher value products, greater
use of controls and energy efficient products, continued strength in data
centre construction as well as greater levels of outsourcing of M&E
services.
“A key area of
growth has been installations aimed at improving energy efficiency and reducing
carbon emissions, driven by legislative requirements and building regulations.”
said Fiona Watts, Editor at AMA Research. “There
has been a rapid expansion in the range of LED lighting and increasingly
sophisticated control systems for heating, lighting, and energy management,
therefore this is a growth area that many contractors have been looking to
exploit.”
However, several factors are negatively impacting the
market at present, such as public sector budget constraints, uncertainty over
the impact of Brexit and greater use of off-site manufactured panels and
modules.
The M&E market is fragmented, with the majority of
market value accounted for by smaller operators with turnover of under £20
million, though consolidation activity amongst suppliers continues. There have
been further strategic acquisitions in response to the growing focus on
integrated services within the sector with contractors widening the range of services
offered and examples of strategic joint ventures to secure work on very
large-scale projects.
In terms of market prospects, the M&E sector is
heavily dependent on the performance of the non-residential construction
industry. Non-residential construction output is facing subdued growth into the
medium term. Furthermore, new non-residential work remains highly susceptible
to changes in levels of business confidence with the private commercial sector
being particularly vulnerable to changes in speculative development
programmes.
The current uncertain economic climate and falling levels
of business confidence relating to Brexit and other issues is likely to halt
growth within the M&E contracting sector within the short term, although
there are positive influences on market value that will underpin growth to some
extent, including a relatively stable RMI sector and increasing prices of
imported products. Output within the office and education sectors, which
accounted for over 45% of the M&E market in 2016, is expected to decline
until 2018. Overall, it is estimated that the market will remain flat through
to 2018, then return to growth from 2019 onwards but at a modest rate of 1-2%
per annum.
The ‘Mechanical
and Electrical Contractors Market Report – UK 2017-2021 Analysis’ report is
published by AMA Research, a leading provider of market research and
consultancy services with over 25 years’ experience in the construction and
home improvement markets. The report is
available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.
