Berkshire, United Kingdom: BSRIA has released its first snapshot of the HVAC and smart energy market landscape in the United Kingdom for products post Brexit, and the figures indicate that the market will see the numbers in red.

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

With respect to the air conditioning market, the association revealed that growth has dropped from a very strong 12.8% down to 5.5%. Smaller splits, it elaborated, 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.

Project delays resulting from Brexit, the association highlighted, may have a small effect in 2016 but will mainly impact the market between 2017 and 2019.

The association explained that 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, it added, is almost 100% imported from Asia and European factories, and there are only three chiller manufacturers in the United Kingdom.

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

Andrew Giles

Drawing attention to the heating market, 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.”

He further claimed that the Kingdom has the biggest boiler market in the world, by a considerable distance, with nearly 1.7 million boilers sold a year, and it is expected to be the case until 2020. He also said that there are no longer any British-owned boiler manufacturer companies in the country, and the boiler market is entirely controlled by EU-owned companies, with their headquarters elsewhere in the EU.

“Also post-Brexit,” Giles said, “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.”

The association said that commercial fire and security and building control products account for 68% of the 1.6 billion smart technologies market. These products, it added, are more likely to be put in towards the end of commercial projects.

Andrew explained: “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.”

Summing up the situation, Giles said: “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.”