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% for 2016 prior to the Brexit vote but Building Services Research and Information Association (BSRIA) research with suppliers post-Brexit now anticipates this will shrink to 1.1%, a reduction of £95 million compared with the pre-Brexit view.
Specifically for air conditioning, predicted growth has dropped from 12.8% down to 5.5%. Smaller splits have suffered due to cool summer in the first half of the year, plus issues with the distribution chain, higher than expected residual stocks and a weakening in the critical retail market.
VRF and central plant products are much more closely linked to larger projects close to completion: typically offices and hotels. Project delays resulting from Brexit may have a small effect in 2016 but will mainly impact the market between 2017 and 2019 according to BSRIA. However floor space statistics suggest a big growth in completed projects in 2017 so this will likely mask any Brexit effect until 2018, according to the snapshot.
Andrew Giles, director of worldwide market intelligence at BSRIA, said: “Around 80% 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% of sales are for replacement and extensions/refurbishment.”
The UK has the biggest boiler market in the world, by a considerable distance, with nearly 1.7 million boilers sold a year and this is expected to be the case until 2020. There are, however, no longer any British-owned boiler manufacturer companies in the UK: the boiler market is entirely controlled by EU-owned companies, with their headquarters elsewhere in the EU.
Post-Brexit, subsequent trade deals between the UK and the EU could prove difficult once Brexit negotiations are defined and Article 50 is invoked. Because of likely increased red tape, importing boilers or components into the UK could be harder. In the short term, BSRIA predicts that companies manufacturing in the UK will gain competitive advantage in the UK because of the lower pound.
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).
Mr Giles said: “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 2% 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, however it will not be until 2018 that suppliers see the full implications.”