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BSRIA says: post Brexit vote - HVAC & smart energy falls by £95 millionSeptember 2016


"The big themes today can be encapsulated in the acronym SMAC - Social media, Mobility, Analytics and the Cloud" Andrew Giles, BSRIA
BSRIA has released its first snapshot of the UK HVAC and smart energy market landscape for products post Brexit.

The HVAC and smart energy product market is estimated to be worth £4.5 billion in the UK per annum. Market growth was expected to be a healthy 3.1 per cent for 2016 prior to the Brexit vote but BSRIA research with suppliers post Brexit now anticipates this will shrink to a “meagre 1.1 per cent”, knocking off £95 million compared with the pre-Brexit view.

Air conditioning

Growth has dropped from a very strong 12.8 per cent down to 5.5 per cent. Smaller splits have suffered due to cool summer in first half, plus issues with the distribution chain, higher than expected residual stocks and a weakening in the critical retail market. Brexit is already “playing a part” as any delays in investment decisions can impact these products very quickly.

VRF and central plant products are much more closely linked to larger projects close to completion: typically office and hotels new build and refurbishment. Project delays resulting from Brexit may have a small effect in 2016 but will mainly impact the market between 2017 and 2019. However floor space statistics suggest a big growth in completed projects in 2017 so this will mask any Brexit effect until 2018. Also some completions may now be delayed from 2016 to 2017 as a result of Brexit, hence the reduction in our 2016 forecasts.

The lowering of the pound will have a limited effect as the air conditioning market is mainly imported, so prices will rise or margins decrease. Packaged air conditioning is almost 100 per cent imported from Asia and European factories and there are only three chiller manufacturers in the UK.

In contrast, over half of airside products are manufactured in the UK. Both fan coil and airside manufacturers will see a benefit in margins and there could be an increase in the limited export market to Middle East and Commonwealth.


UK markets, home shipments, 2015 (click image to zoom)
Heating

Andrew Giles, Director of Worldwide Market Intelligence, BSRIA, said: “Around 80 per cent of the £2.2 billion market is domestic boilers, water heaters and radiators. Renewable alternatives remain niche markets: heat pumps are falling with RHI having a limited impact. The main heating markets are saturated and over 90 per cent of sales for replacement and extensions/refurbishment.

With the death of the Green deal and other schemes BSRIA had expected a flat market for heating but now expect a small proportion of consumers to delay going ahead with refurbishment because of the general uncertainty surrounding Brexit resulting in a drop of 1.2 per cent in the market.

Manufacturing is strong for the UK market and local manufacturers will gain competitive advantage over importers, although some imported component costs may rise.”

Smart technologies

Commercial fire and security and building control products account for 68 per cent of the 1.6 billion smart technologies market. These products are more likely to be put in towards the end of commercial projects.

In 2017 the continued pull through of commercial projects nearing completion which were started two years ago will mask any further falls from Brexit, with almost no effect on fire as it is regulation driven.

Building control products should follow a similar pattern to central plant but growth is lower as many sales are to public areas (health, education, central government).

Andrew added: “For domestic controls the main markets are valves and actuators, thermostats and domestic controllers. This is a very large market ranging from simple thermostat and valves to very sophisticated smart home devices linking in with apps and other housing devices and services. It has a strong link with the heating market and is principally sold for refurbishment and replacement applications.

There will be a maximum effect on the market in 2016 of two per cent lower growth, a large chunk of which of which can be attributed to Brexit. Looking further ahead: the uncertainty could start to affect the market adversely in 2017 – but will be partly offset by a high level of project completions so – it will not be until 2018 that suppliers see the full implications.”

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