The market for mechanical and electrical (M&E) contracting was estimated to be valued at around £16bn in 2014, following strong growth of around 7% during the year.
The market is forecast to continue to increase, albeit at a more modest rate, until the end of the forecast period. However, the market remains some 13% below its 2008 peak.
While demand was sustained to some extent by work in the transport and leisure sectors in connection to the Olympics and ongoing work in the health and education sectors throughout 2010 and 2011, public sector cuts and poor construction in retail coupled with declining business confidence, led to construction levels and demand for M&E services falling, resulting in a market decline in 2012.
A return to growth in 2013 driven by improvements in office and leisure sectors in particular and private construction output in general. This growth continued into 2014, with industrial and education output also supporting improvement. A key area of growth has been installations aimed at improving energy efficiency and reducing carbon emissions, driven by increasingly stringent legislation and regulations, but also given impetus by the long-term cost savings that can be made by installing such systems, driven by underlying, increasing fuel costs.
As market conditions improve, M&E contractors are starting to experience the benefits of restructuring and streamlining exercises through improved margins. Consolidation activity amongst suppliers continues to be high within the market and this has led to a number of major players increasing in size. 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.
The market for M&E contracting in the UK is heavily dependent on the performance of the construction industry. Non-domestic construction output is set to increase during 2015 and remain positive through to 2019.
The fact that businesses within both the public and private sectors urgently need to find cost savings has led to demand for more energy efficient heating, lighting and ventilation systems, both the simple extract types and the mechanical extract and heat recovery types. In addition, this type of work will also be stimulated by legislation and guidelines around carbon reduction and renewable energy sources and as a result energy management will become an even more important area of focus for M&E contractors.