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In 2007 the UK Electrical Wholesale Market grew
modestly in terms of value, with growth rates weaker than 2006.
Economic and trading conditions started to worsen mid way through
2007 as the credit crunch started to impact on the UK economy with
the knock on effect on residential housing.
The general feeling amongst electrical wholesalers
with regard to sales growth changed from one of optimism at the
beginning of the year and became more pessimistic as the year
progressed. However there was some growth in the market and as a
result we estimate the total market in 2007 to be worth some £3.25bn
at wholesaler selling prices.
The chart left shows the development in current
prices, and indicates that the market has been relatively stable
over the review period, reflecting the fact that this is a mature
market overall. In general, growth rates have been 2-4% over the
period, but during 2006 in particular value growth had been stronger
and reached 7%, before dipping in 2007.
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Key factors that have contributed to growth in recent years
have been; the increasing levels of government investment in health,
education, housing and certain infrastructure sectors, a growth in niche
end-user markets including fire and security including CCTV, lighting and
portable accommodation, and continuously evolving legislation, including
energy efficiency and disability discrimination legislation, However, one
of the main contributors to value growth in the market has been the
substantial increases in steel, copper and PVC-u prices during the review
period.
Negative
influences affecting the UK electrical wholesalers’ market have included
trends to longer product life and in certain instances lower replacement
component prices which erode the growth of market value, also a trend to
increasing levels of price competition and higher overhead costs leading
to pressure on margins.
Customer
and end user confidence has also been affected by talk of possible
recession coupled with a significant decline in new housing starts and
national housebuilders having to take action by ensuring overheads are
reduced and land purchases are delayed. It is likely that independents,
smaller electrical wholesalers together with regionals and nationals where
branches have relied heavily on supplying products to new housing
development will continue to feel the impact of that uncertain market for
some time. However, no doubt there will be opportunities for those
wholesalers who are prepared to actively prospect for new business in the
commercial and industrial sectors.
The
generic drive to improved sustainability and resource efficiency is likely
to lead to a change in the nature of many electrical product types. Those
products associated with electricity usage will be influenced by the drive
to resource efficiency, leading to greater usage of building controls and
higher efficiency operation. In addition, the shift to producer
responsibility means that all manufacturers will be seeking to ensure
their products can be recovered and recycled as far as possible.
Overall,
we forecast that the market will deteriorate in each of 2008 and in 2009,
driven by the very poor domestic house building and house moving sectors,
the implications for RMI in the domestic sectors and the knock-on impact
of these down-turns in the commercial and other non-residential sectors.
It is forecast that by 2010 there will be some recovery, driven by the
impact of the Olympics, Crossrail and other construction programmes in the
infrastructure and commercial sectors.
The new
environmental challenges particularly with regard The Code for Sustainable
Homes, which contains 6 mandatory performance levels, will have a
significant effect on the way homes are built in the future and should
start to increasingly influence product specification. Achieving Code 6
will require major changes in design and specification over the next
decade particularly in relation to energy-saving elements.
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