INDUSTRY NEWS
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 As- sociation (BESA).
The Association’s latest annual Top 30 Mechanical and
Electrical (M&E) Contractor report, pro-duced in partnership with the construction consultancy GHCS/GH Engage, found the sector’s largest companies in good spirits despite most experiencing severe difficulties 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 five years.
The 5th edition of the report did reflect on the string of
high-profile insolvencies suffered 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 firms say-ing they had “turned a corner”. The UK M&E contracting market is worth approximately
£20 billion and constitutes around a fifth 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 sophisti- cated and technology driven. Gokhan Hassan, managing director of GHCS/GH Engage, said the report showed that the in-dustry was “heading in the right direction”, but he warned that financial headwinds would per-sist for the next two to three years.
Tough
BESA’s chief executive officer David Frise agreed that market conditions remained “tough”, and that profitability was still “relatively low”, but he praised many of the sector’s larger firms for refocusing their businesses on high value, fast growing sectors, such as data centres, research, and healthcare, and for “avoiding low bidding as much as possible”. Growing pressure on clients to meet net zero targets
and greater investment in refurbishment and retrofit 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. “The sector is seen as ‘risky’ and cash poor by the
money markets and shifting that perception will take some time,” said Frise. “However, our report and the interviews with leading contrac-tors demonstrate that most large MEP firms have a strong foundation for progress and are fo-cused on reducing their exposure to risk, which should go down well with insurers.” BESA also believes that project bank accounts will play a larger part in industry financing over the next few
BESA’s chief executive David Frise
years as more clients recognise how they can be used to insulate them from risk while ensuring better cash flows through supply chains. The report also revealed that more MEP firms were being asked to take on the role of principle contractor on large multi-million pound projects because the building services elements ac-count for an increasing proportion of the overall value. Abdul Tantouch, head of content at AMA Research, said the M&E contracting market had demonstrated “significant resilience” having rebounded from a 12% decline in 2020 caused by the Covid-19 pandemic. “The sector has not only recovered to pre-pandemic
levels, but is now on a trajectory of robust growth,” he added. “This is being driven by the integration of innovative practices and technol-ogies aimed at advancing towards net zero carbon emissions.” Tantouch said the market was expected to achieve a
value of almost £21 billion next year, sup-ported by key trends such as increased demand for data centres and green energy solutions. However, most of the firms 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. “The financial stability of our largest firms is important
because it feeds down through supply chains and has a direct impact on the profitability of thousands of smaller, specialist contrac-tors,” said Frise. “It is, therefore, heartening to see our top 30 in a better place following the extraordinarily challenging conditions created by the unprecedented combination of the pan-demic, Brexit, and the war in Ukraine.”
Inbrief
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REHAU has revamped its showrooms across the country, allowing building services and district heating specifiers and contractors to get a hands-on look at the company’s full range of plumbing and heating solutions.
www.rehau.com
British Gas claims it has launched the UK’s lowest heat pump rate, to make low carbon technology more affordable and encourage heat pump uptake. The new energy offering is available to all British Gas energy customers who purchase any air source heat pump from British Gas and aims to help drive the adoption of heat pumps in the country.
www.britishgas.co.uk
Heating, plumbing and air movement materials supplier TG Lynes is cele-brating a year-on- year carbon reduction of 14%. A combination of im-provements to its Enfield headquarters and further investment in green vehicles has helped the business smash its 12-month carbon saving tar-gets.
www.tglynes.co.uk
Beijer Ref, the wholesaler for refrigeration, heating, ventilation and air conditioning technology, and the refrigeration, air conditioning and heat pump specialist BITZER have extended their partnership agreement by another three years. They will continue to focus on supporting their cus-tomers in finding sustainable solutions.
www.bitzer.de/gb/en/ www.beijerref.com
Adam Taylor, chief executive of ARM Environments, has been elected as chair of the Indoor Air Quality (IAQ) group of the Building Engineering Services Association (BESA).
www.thebesa.com
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