The UK Lighting market has experienced growth of around 7% over the 2003 – 05 period and is estimated to be worth £1.37 billion in 2005. Growth has been driven by a non-domestic market driven by national and local government investment, an increase in demand for higher value products and an increase in sales of lighting controls and equipment.  In contrast, demand from the domestic market, which has enjoyed good growth since 2001, has declined substantially, and this sector has shown no growth over the last two years.

Lamps are estimated to account for around 28% of the UK Lighting market in 2005.  This slight decline in market share is due to the continued price erosion of domestic lamps as cheaper exports and own-label brands make this commodity market highly price sensitive.  Although there is  a continued switch in demand for higher value lamps, such as tungsten halogen, even these have been subject to price erosion and have not increased value growth significantly.  The lamps sector is supported by growth in higher value products such as LED lamps that are increasingly being specified in non-domestic projects.

The majority of the market value is in luminaires and lighting control equipment.  Once again, the domestic sector has experienced a slowdown in value growth due to the influx of cheaper sourced imports.  However, the delivery of national and international contracts, particularly for architectural lighting, specialist applications and amenity lighting, has given the non-domestic luminaire sector a real increase in value, and the luminaires sector reached an estimated value of £986m in 2005.

Several factors have led to the rejuvenation of the non-domestic sector.  A wide range of legislation has been introduced over the last five years, most of which is only just beginning to have an impact on the market.  Changes in recommended levels of lighting, emergency lighting provision and the drive towards energy efficiency are now having a growing impact on the UK lighting market. 

Another key driver is the substantial rise in Government investment in buildings, facilities and amenities financed through a combination of direct funding and the Private Finance Initiative (PFI).  This is creating opportunities for local authorities to upgrade their facilities using investment from Public/Private Partnerships (PPP) in which private companies bid for long-term refurbishment and maintenance contracts from local authorities and other public bodies.  In conjunction with a major investment programme in school buildings and the National Health Service, the amount of expenditure on lighting has significantly increased over the last few years and looks set to continue in the medium-term.

The domestic sector has been severely hit by a downturn in consumer confidence and a decline in activity in the housing market.  Despite the continued interest in lighting as a key element of interior design, levels of expenditure have fallen.  This is a mature market and the sector is very price competitive.  Major multiple grocery and DIY retailers are offering very cheap lighting solutions and expanding their ranges as they pursue growth through the offering of ‘lifestyle’ products.  This only increases price competition and any growth in volume sales has been offset by a decrease in value.  Many domestic luminaire manufacturers have experienced very difficult trading conditions over the last 2 years as they have struggled to maintain margins.

Many lamps and luminaire products, particularly high-volume ranges, are sourced from countries offering cheap labour, with China being one of the main manufacturing sources.  The majority of manufacture in the UK is now specialist work often specified for particular projects by lighting consultants and designers.  The UK manufacturers reputation for craftsmanship and quality remains high despite the decline of resources. 

The UK Lighting industry is following the trend of the UK as a whole towards that of a ‘knowledge’ economy and UK lighting companies are enjoying success in winning prestigious overseas contracts based on quality delivery and design flair.  However, new technical developments are increasingly in the hands of the global lighting companies who have the resources to invest, and new product development, particularly in the lamp sector, has to a large extent been lost in the UK as multi-national corporations set up development centres in their home countries.

Distribution of lighting products has not varied dramatically over the last few years.  The domestic market is led by grocery and DIY multiples, while wholesalers and specialist distributors dominate non-domestic lighting.

In terms of supply, the market for lamps remains very concentrated and is still dominated by the ‘Big Four’ manufacturers: Philips, Osram, GE and SLI.  The luminaries sector, however, is virtually the opposite in terms of structure. The industry remains very fragmented reflecting the wide range of designs, materials, own branding and distribution channels used, with manufacturing economies of scale and investment costs much less significant in the luminaries market.