The utilities connections market is closely aligned with levels of non-domestic construction output and housebuilding, in addition the health of the utilities construction market also impacts on the value of the connections sector. Estimation of the market value for the utility connections market is difficult due to the variation in the volume and value of such connections made available through the various utility sub-sectors.
The utilities connections market experienced good annual growth rates 2006-08. The market subsequently suffered an 18% reversal to 2011, due to significant volume decline in sectors such as housebuilding, private commercial and retail. The connections market appeared to stabilise in 2011 and 2012, underpinned by increases in the average price of electricity connections, though the outlook for 2013 and 2014 is for only modest growth at best. In common with many other construction sectors, the market has become characterised by increasing price competition as contractors compete for diminishing workloads. The decline in the housebuilding sector has been particularly significant for the majority of utilities connections with the decline in the commercial sector affecting both HV and unmetered electricity connections as well as the non-domestic gas installations.
The gas sector has been heavily affected the downturn in construction with the volume of connections decreasing by around 39% 2008-10 with corresponding value decline of 55% over the same period. Gas connections volumes increased by 12% 2010-11, but value decreased by around 8%. 2012 is considered to have been stable, with modest growth by volume balanced by the price competition. Electricity connections have also been affected by construction downturn with 38% volume decrease 2008-11 and corresponding value decline of 21%.
Although distributed generation connections have experienced significant growth 2008-11, the latest trend has been for 19% decline 2010-11 as changes to Feed In Tariffs (FIT’s) affected the number of domestic installations of solar pv systems. Water industry connections peaked at 421,800 in 2007-08 coinciding with the buoyancy of the new housebuilding market at the time. The subsequent 35% decline to 2010-11 underlines the importance of the new housebuilding sector.
The increased take up of 3G network devices and the launch of 4G networks 2012-13 is likely to stimulate telecoms connections volumes into the medium-term however average value of connections is likely to face continued downward price pressure due to the level of competition within the sector. Growth in the connections market remains dependent upon the recovery of new housebuilding and non-domestic construction sectors with prospects for both remaining subdued into Q1 2013. Longer term prospects are currently viewed as modest with value expected to increase to around £1.18bn by 2017, approximately 21% higher than value estimated for 2011.