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6 June 2024 • www.acr-news.com Download the ACR News app today


Building services sector is ‘turning the corner’


M


echanical, electrical, and plumbing (MEP) contractors are increasingly optimistic about their future growth prospects,


according to a new report from the Building Engineering Services Association (BESA). The Association’s latest annual Top 30 Mechanical and Electrical (M&E) Contractor report, produced in partnership with the construction consultancy GHCS/ GH Engage, found the sector’s largest companies in good spirits despite most experiencing severe diffi culties over the past few years. Collective turnover is up by 16% on last year and


most reported robust growth prospects for the next two to fi ve years.


The 5th edition of the report did refl ect on the string of high-profi le insolvencies suff ered by the sector recently, notably Michael J Lonsdale, and continuing consolidation across the sector. However, it also found senior managers in a more hopeful frame of mind, with most fi rms saying they had “turned a corner”. The UK M&E contracting market is worth


approximately £20 billion and constitutes around a fi fth of the UK construction sector’s GDP. Those interviewed for the BESA report said that value was likely to increase over time as building engineering services became increasingly sophisticated and technology driven. Growing pressure on clients to meet net zero


targets and greater investment in refurbishment and retrofi t of the existing building stock were also contributing to better market conditions, according to the report. However, investors are still treating


construction-related businesses with caution. BESA also believes that project bank accounts will play a larger part in industry fi nancing over the next few years as more clients recognise how they can be used to insulate them from risk while ensuring better cash fl ows through supply chains. The report also revealed that more MEP fi rms


were being asked to take on the role of principle contractor on large multi-million pound projects because the building services elements account for an increasing proportion of the overall value. Minimum Energy Effi ciency Standards (MEES) legislation is also expected to fuel further growth as commercial building owners and managers look to avoid ending up with unlettable ‘stranded assets’. This will lead to more MEP contractors working directly for end clients, according to the report. Along with promising UK-wide GDP growth in the


fi rst quarter of this year, another key development is the easing of infl ation pressures. While material and labour prices remain at historic highs, pricing stability has returned making it easier for companies to plan. However, most of the fi rms interviewed said it would take time to adapt to the biggest change to building safety regulations in a generation in the shape of the Building Safety Act. The industry also has some major problems


around productivity and skills that will have to be addressed if growth is to be sustained, according to BESA, which emphasised the importance of increasing the level of digital skills in the workforce and improving diversity.


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