AMA report provides major market review

Edited by the Buildingtalk editorial team Nov 20, 2008

UK ventilation, air conditioning and non-domestic heating market, estimated to be worth some GBP1.4 billion, having increased by an estimated 4% in 2006-2007.

"Current indications in mid-late 2008 suggest that the overall UK HVAC market is under pressure from the adverse impact of the downturn in commercial office construction and the housebuilding sector, though to date the market has sustained performance levels".

"However, our estimates are for deterioration during 2009-2010 of around 5-6% per annum over the 2-year period, followed by some market recovery of around 5% during the period 2011-12".

Priced at GBP625, the report is currently available from AMA Research .

Summary:.

The core product sectors of the UK ventilation, air conditioning and non-domestic heating market include air conditioning, with an estimated 42% share, ventilation with a 15% share, non-domestic heating, also with a 15% share, and accessories, including controls, with a share of 28%.

2007 proved to be a reasonably buoyant year for consumer spending, which tended to impact positively on the demand for residential air conditioning, ventilation, and heating products, however there were signs of a slowdown in Q4, as the impact of the housing slowdown and the 'credit crunch' began to take effect.

High levels of Government Expenditure - for example, in the health and education sectors - have underpinned construction growth, while offices and retail new build and refurbishment have been buoyant providing significant motivation for the overall HVAC market.

The level of demand for HVAC products tends to vary regionally throughout the UK, reflecting various levels of construction activity, local industry specialisation, also seasonal and climatic factors.

There is increasing overlap between the principal sectors of the HVAC market with heat-pump based systems competing with boilers, ventilation systems providing comfort cooling, and underfloor heating competing with radiators.

Current indications in mid-late 2008 suggest that the overall UK HVAC market is currently under pressure from the adverse impact of the downturn in commercial office construction and in the housebuilding sector, though to date the market has sustained performance.

However, our estimates are for deterioration during 2009-2010 of around 5-6% per annum over the 2-year period, followed by some market recovery of around 5% during the period 2011-12.

It is emphasised that the economic environment in mid-2008 is extremely volatile, and currently deteriorating, therefore the above forecasts are subject to change.

Levels of future growth in the HVAC market are likely to be underpinned by sustained investment in health and education, also major construction projects, including, for example, the Olympic infrastructure and Commonwealth Games.

Positive niche sector construction influences include growth in renewables and waste management operations, decommissioning of nuclear power stations, also defence sector developments, etc.

It is likely that the cumulative impact of raw material, refrigerant, and energy price rises will tend to add value to the overall HVAC market in the medium term.

An adverse impact is represented by a slowing down in household consumption, as consumers cut back on 'non-essential' spending, which is likely to limit the level of RMI retrofit residential air conditioning opportunities, also ventilation, heating and accessories opportunities, etc.

In the non-housing sector, existing order books are generally firm which will limit the impact on HVAC product demand in the short term, but undoubtedly more speculative developments in office and retail development will become increasingly affected.

Commercial office construction is likely to be the largest casualty of the credit problems, though given the scale and planning timescales for many projects, the impact is likely to be stronger in 2009-10.

AMA Research's "Ventilation, Air-Conditioning and Non-Domestic Heating Market - UK 2008 - 2012" report is available in hard copy or electronic format for GBP625 and can be ordered online or by calling 0871 3103450.