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UK Market for Mechanical and Electrical
Contracting 2007 – 2013 by Value (£bn)
The
market for mechanical and electrical (M&E) contracting is estimated
to be valued at around £14.9bn in 2011, a decline of 17% since its
peak in 2008. The market experienced strong growth between 2005 and
2008 driven by an increase in construction output, growing levels
of outsourcing and a continuing move towards more efficient
building services solutions. The value of the market fell in 2009
due to difficult trading conditions and the impact of the general
economic downturn on the wider construction industry.
The market
continued to be sustained by work in the transport and leisure sectors in
connection to the Olympics as well as ongoing work in the health and
education sectors throughout 2010 and 2011. However, as a result of a
reduction of new projects being tendered, competition increased
substantially affecting prices negatively. This, in combination with weak
demand generally, led to a continued decline in value terms within the
market.
Current
conditions in the M&E contracting market can only be described as
challenging. Competition is fierce among contractors, with reports of
businesses submitting tenders at, or even below, cost price in order to
secure work or retain clients. Profit margins, which were already under
pressure during the early part of the review period, have declined
further over the past few years.
The amount
of consolidation activity continues to be high within the market, and
this has led to a number of the major players increasing in size over the
past few years. The growth in strategic acquisitions is also in response
to the growing focus on integrated services within the sector with
contractors widening the range of services offered.
A key area
of growth in recent years has been installations aimed at improving
energy efficiency and reducing carbon emissions, driven by increasingly
stringent legislation and regulations around this, but also given impetus
by the long-term cost savings that can be made by installing such
systems. This trend, combined with a requirement for higher levels of
cost control has seen growth of installations of integrated systems,
which provide greater control and measurement of energy usage.
The market
for M&E contracting in the UK is heavily dependent on the performance of
the construction market in general. With non-domestic construction output
set to remain static or decline further during the remainder of 2011 and
into 2012, prospects for growth in the immediate future are bleak. A
further decline is expected in 2012 as Olympics related projects in the
transport and leisure sectors are completed and the impact of the public
sector spending cuts, particularly in the health and education sectors,
start to take effect.
The market
is forecast to start to recover from 2013, with growth stimulated by
recovery in the private commercial construction sectors. Growth is also
likely to be fuelled by a number of government initiatives around
construction and energy management coming into effect in 2013. It is
estimated that the market may reach £15.6bn by the end of 2015, though
this is still significantly below the levels seen in 2008, when it was
worth nearly £18bn. |
