The electrical
wholesale market has experienced difficult trading conditions in
recent years, reflecting the poor economy and difficult
construction environment. In 2010, the market was estimated to
be worth £2,997m. This represents a decline of 15% on 2008.
While improvement in some sectors, such as housing, is forecast
for 2011/2012, recovery in the electrical wholesaler market will
be slow and the market value is not expected to return to its
peak level during the forecast period.
Factors supporting
the market include government capital expenditure in key sectors
such as health and education, growth in specialist markets,
product development in many sectors, demand for additional
services and non-core products, and evolving legislation leading
to a requirement for higher specification and new types of
products. Factors negatively affecting market growth include
continued low levels of construction, particularly for new
build, poor exchange rate, increased price competition, a
growing threat from competitive channels and longer product
life-spans reducing the replacement market.
Electrical
wholesalers remain market leaders in distribution of electrical
products and are particularly strong in core product areas such
as electrical accessories and test equipment. It is unlikely, in
the short to medium term, that they will relinquish their hold
on these markets. In recent years, competition has intensified
within the distribution market for electrical products. The
direct sales and specialist distributor channels are the most
significant competitors to the electrical wholesalers at
present, with electronic component distributors, trade
catalogues operations, internet retailers and merchants also
significant.
Over the past two
years, electrical wholesalers have continued to widen their
product portfolios, introduced additional services in order to
add value and embraced e-commerce, in order to become more
flexible and remain competitive in the present difficult trading
climate. Cables, circuit protection & switchgear and lighting
remain the largest product sectors within the electrical
wholesale market, accounting for an estimated 54% of the value
of products sold.
Product sectors
experiencing relatively good performance in the current market
include security & fire systems, controls and test equipment,
with growth driven by increasingly tight legislation. The cables
market has also experienced growth primarily due to higher raw
material prices. In general, product prices have increased with
the additional driver of higher cost of imports, due to the
current weakness of the sterling.
The electrical
wholesale market is expected to decline in 2011, although at a
slower rate than in the past, as some end use markets begin to
recover and trading conditions slowly improve.
Current forecasts
for construction output and for the economy in general suggest
that the business climate will see slow recovery. The electrical
wholesaler market is likely to be negatively affected by a
reduction in large projects going to tender and the spending
cuts announced for the public sector, and while the market is
expected to return to growth in 2012, the forecast is for a
small decline over the year as a whole.
From 2013 onwards,
the market is expected to display average growth levels of 4-5%
resulting in a market value in 2015 forecast at £3,268m,
representing a 9% increase on 2010. Growth will be driven by the
improving economy and a number of new government measures
related to energy efficiency as well as other policy areas,
taking effect.
