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UK air conditioning market overviewMarch 2009

With the UK in recession, what does the future hold for sales of air-conditioning systems? BSRIA's David Garwood takes a look at recent market trends for central plant and terminal units and tries to establish the likely winners and losers.

Since 2006 there have been significant changes in the market for air-conditioning equipment. In 2006 sales were driven by both hot weather and construction growth. In 2007 and 2008 the UK experienced much cooler summers, which dented sales of air-conditioning equipment, especially those more heavily reliant on weather patterns such as single splits and mobile units.

Sales of products such as chillers, close-control units, rooftop and variable-refrigerant flow (VRF) systems are more dependent on prevailing construction trends and are more project-led - generally speaking a buoyant market in large offices will favour such systems. As a consequence, central plant products enjoyed significant sales growth in 2007 and into 2008. Chillers recorded their highest number of sales in 2007 and continued to do well, at least in the first part of 2008.


Turbocor centrifugal chillers are taking market share from screwtype chillers, although the former are starting from a very low base (click image to zoom)
As consultants are still specifying products for buildings currently in design, the HVAC sector usually lags 6-8 months behind any change in construction demand. So under the current economic conditions BSRIA anticipates that a downturn in the HVAC market will start in the beginning of 2009.

Demand for air-conditioning equipment is still high in some sectors such as hotels, but finance for projects is increasingly difficult to obtain. The downturn in the economy is causing a swing away from new build towards refurbishment projects, so manufacturers are now focusing their sales efforts towards the refurbishment sector. However, even refurbishment is proving hard to finance.

Central plant systems

The chiller market grew in volume and value by 19 percent and 33 percent respectively in 2007. The rise in market size was led by demand from the construction sector, in particular for larger chillers.

In 2007 many manufacturers reported strong growth in the market for central plant and packaged products. In terms of volume the majority of the market (79 percent) is now in units smaller than 500 kW. In 2007, the market saw growth in the centrifugal market following increased awareness of the turbocor compressor product among consultants (though growth will be limited as the product has a higher capital cost), and shifts in refrigerant from R407C to either R410A or R134A.

The VRF market will continue to attack the chiller market at the lower end (smaller than 350 kW), and the screw compressor market will continue to face threats from multiple-scroll compressors. The market for reciprocating compressors has declined significantly and is expected to almost vanish next year.

The total market for air handling units (ahus) declined by volume slightly in 2007 by 3 percent. The decline in sales is in line with the decline of the variable air volume (vav) terminal unit market in favour of air-to-water systems, such as chilled beams.

Not all ahu companies have suffered a decline in the market - some have enjoyed a significant increase in market share. Some of these companies have lengthy contracts to supply end-user clients for three years or so, therefore cushioning themselves from the effects of the market downturn.

The number of ahus sold with heat recovery increased significantly in 2007. Suppliers report a trend away from plate heat-exchangers towards run-around coils and thermal wheels (in particular the double wheel product). There has also been a trend towards more efficient heat recovery.

The fan-coil market bounced back in 2007 to levels last seen in 2003 as the value grew by 15 percent over 2006 to £30.9 million. The trend in the terminal unit market is towards a straight fight between fan coils and active chilled beams. Fan coils can now compete more effectively against chilled beams on an energy efficiency basis due to the introduction of electronically commutated or direct current motors.

VAV terminal units are set to decline and will become mainly a replacement product. It is expected that chilled beams will take a greater market share of a largely static market.

Packaged air-conditioning

The UK market for moveable air-conditioning products was estimated at € 23.4 million in 2007 and 87,600 units - an increase in volume of 76 percent and 17 percent by value.

Despite early optimism, 2007 was a poor year for sales of moveable air-conditioning products. The moveable market is very much focused on several key retailers and is driven by projects like airport terminals. Some players lost market share whereas others who won key contracts did relatively better. That said, the market witnessed a significant drop in average price as many sales in 2007 were made at heavy discounts.

The market for windows and through-the-wall units market declined significantly in 2007, from 5,000 units in 2006 to 2100 in 2007. Although such products have not been mainstream for around 10-15 years,three new players have entered the market: Crafft, Mitsui and EHS International.

The total market size of all split systems (ducted & ductless) in the UK was €534.0 million in 2007 with a corresponding volume figure of 221,284 units. This is an increase in value by 11 percent and a decrease in volume by 1 percent. The upward trend in price was mainly due to rising material and production costs, further penetration by VRF, plus the trend towards more energy efficient products. Growth in maxi-VRF has been led by demand for heat-recovery products, which in turn has led to the upward trend in price.

The rooftop market was valued at €17.1 million representing a volume of 2,200 units in 2007. This is an increase in the number sold in 2006 by 16 percent and 0 percent by value. According to the latest planning approvals, supermarket chains such as Tesco, Sainsbury's and Aldi have a number of sites with planning permission, hence sales of roof tops that are typically installed in these applications are expected to rise.

The total value of the close-control air-conditioning market was estimated to be €85.1 million in 2007 with a corresponding volume of 8,190 units, which is a rise on value and volume of 43 percent and 28 percent respectively. The recent financial turmoil will dent sales of close-control air-conditioning systems. Lehman Brothers was expected to build a large data centres in Slough, Berkshire, but following the firm's collapse this now looks very unlikely.

 

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