Even with the economic uncertainties surrounding Brexit, the M&E market grew by almost 4% in 2019 to £34.5 billion. However, the significant impact of COVID-19 in 2020 has seen the market decline by almost 19%.

After years of slow growth in what is essentially a mature sector, albeit one bringing in new technology the disruption caused by COVID-19 has been widespread. Not all sectors have been impacted equally, and not all sectors will quickly recover.

Some of the end-use sectors are now expected to reflect structural changes that have been either initiated or accelerated by the pandemic. The levels of office demand will fundamentally decline with remote working becoming more commonplace with lockdowns and social distancing measures. The bricks and mortar retail sector has faced accelerated competition from e-commerce changing the demand for buildings. Universities have stalled investments, and generally the gestation period of M&E contracts has extended along with the economic disruption and uncertainty.

At the same time, some types of building have seen demand grow; data centre usage has been boosted by remote working and warehouses have proved a resilient area of demand partly influenced by Brexit. As commercial buildings are vacated as leases lapse, then so repurposing to residential accommodation affords a major opportunity to both address the housing shortage, utilise brown field development and occupy the high street. Residential construction could strongly exceed previous expectations and potentially meet government targets.

Key issues covered in this Report

  • The difficulties faced by the M&E industry in 2020 as a result of COVID-19 together with the forecast opportunities

  • Which demand sectors will gain as a result of the trends created or furthered by COVID-19

  • Which end-use markets will face structural changes as a result of the market changes also including the Brexit impact

  • How the separate sectors of the industry are performing

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It wasn't until 15 June that non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions. 

If case numbers remain high, it can be expected that the lockdown will be extended in England, but even if the second national lockdown does end as planned on 2 December, the current plan is to return to the regional tiered approach that was in force before the lockdown, meaning that large parts of the country may still effectively be locked down. 

Economic and other assumptions

MBD’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

The Welsh and English lockdowns will inevitably have an impact on GDP and consumer finances, potentially shifting the UK closer to the OBR’s downside scenario. The market forecasts in this Report reflect this new reality.

From the start of the outbreak, we have made the assumption that an effective vaccine would not be widely available until well into 2021. On 9 November, Pfizer and BioNTech announced highly encouraging results from trials of their vaccine, followed by similarly positive results from Monderna. This means that a vaccination programme may be brought forward, but a full rollout will take many months, meaning that Mintel is still making the assumption that we will be living with COVID for some time to come.

Products covered in this Report

For the purposes of this Report, Mintel has used the following definitions:

Companies that provide mechanical & electrical (M&E) services usually provide the necessary skills required through a combination of in-house resources (usually a team of qualified engineers) and specialist ‘service partners’ contracted to provide assistance across the work spectrum.

Services are subjected to British Standard and other industry standards.

The following is a list of the main mechanical and electrical contracting services provided by the majority of companies, though some companies offer other specialist services:

  • Heating and hot water installations

  • Domestic water services, including infrastructure and storage systems

  • Ventilating and air conditioning

  • Acoustic control

  • Electrical and lighting systems

  • Emergency lighting

  • Public health services, including water treatment

  • Cooling towers

  • Plumbing and drainage systems

  • Control systems and building management systems

  • Lighting protection

  • Uninterruptible power supplies

  • Fire engineering (alarms, hose reel and sprinkler systems)

  • Access control

  • Lifts

  • Energy supply and management

  • Security systems

The Report is split into electrical work and mechanical work. It is difficult to split the above list into two categories as many services fall into both, but a general list for each category is compiled below.

Electrical work: ventilating and air conditioning, acoustic control, electrical and lighting systems, emergency lighting, control systems and building management systems, uninterruptible power supplies, fire alarms, access control, lifts, energy supply and management, security systems.

Mechanical work: heating and hot water installations, domestic water services including infrastructure and storage systems, public health services including water treatment, cooling towers, plumbing and drainage systems, lighting protection, hose reel and sprinkler systems, lifts.

M&E repair and maintenance services refer to the regular maintenance of building/plant and machinery/equipment to keep them in efficient working order. Examples of services provided in the case of mechanical failure include:

  • annual maintenance schedule

  • regular service calls

  • itemised cost and history records

  • measured cost saving

  • maintenance budget management

  • technology search

  • out of hours maintenance (weekends/nights/annual shutdown)

For electrical breakdown or malfunction of equipment:

  • experienced engineers and technicians available 24 hours per day, 365 days

  • nationwide service

  • specialist repairs sourced via an approved sub-contractor

  • job price or contract price basis

  • customised service contracts to cover breakdown and planned maintenance

The definitions used in this Report for the construction sector are from the Department of the Environment, Transport and the Regions. A number of sectors are defined within the construction sector, comprising both publicly and privately financed projects.

The sectors include the following:

Public sector housing: comprising housing schemes, homes for the elderly and the provision within housing sites of roads and services for utilities, such as gas, water, electricity, sewage and drainage, financed either through local authorities or housing associations.

Private sector housing: comprising all privately-owned buildings for residential use, such as houses, flats, maisonettes, bungalows, cottages, and the provision of services to new developments.

Public sector non-residential: this is defined as comprising a number of activities:

  • Coal mining: all new coal mine construction, such as sinking shafts, tunnelling etc.

  • Schools: state schools or colleges, including technical colleges and institutes of agriculture.

  • Universities: including halls of residence and research establishments.

  • Health: comprising hospitals, medical schools, clinics, welfare centres and adult training facilities.

  • Offices: comprising local and central government offices, including town halls and offices for all public bodies except the armed forces and police headquarters.

  • Factories: comprising all publicly-owned factories, shipyards, warehouses and skill centres.

  • Garages: comprising buildings for storage, the repair and maintenance of road vehicles, transport workshops, bus depots, road goods transport depots and car parks.

  • Shops: comprising municipal shopping developments for which the contract has been let by the local authority.

  • Oil: comprising oil installations.

  • Agriculture, entertainment, communications: comprising buildings and work on publicly-financed horticultural establishments, fen and agricultural drainage, and veterinary clinics; theatres, restaurants, public swimming baths, caravan sites at holiday resorts, works and buildings at sports grounds, stadiums, racecourses etc; and Post Offices, the BBC and IBA installations.

  • Miscellaneous: comprising all work not clearly covered by other previously identified headings, such as fire stations, police stations, prisons, reformatories, remand homes, civil defence work, UK Atomic Energy Authority work, council depots, museums, and libraries.

Private Industrial: comprising factories, warehouses, wholesale depots, and all other work and building for the purpose of industrial production or processing, oil refineries, concrete fixed leg oil production platforms (but excluding rigs), and private steel works.

Private commercial: comprising a number of separate sectors:

  • Offices: including all office buildings and banks.

  • Shops: comprising all buildings for retail distribution, such as shops, department stores, retail markets, and showrooms.

  • Entertainment: comprising theatres, concert halls, cinemas, hotels, public houses, restaurants, cafés, holiday camps, swimming pools, works and buildings at sports grounds, stadiums and other places of sport or recreation, and youth hostels.

  • Garages: comprising repair garages, petrol filling stations, bus depots, goods transport depots and any other works or buildings for the storage, repair and maintenance of road vehicles, and car parks.

  • Schools and colleges: comprising schools and colleges in the private sector, financed wholly from private funds.

  • Agriculture: comprising all buildings and work on farms and horticultural establishments.

  • Health: comprising all private hospitals, nursing homes and clinics.

  • Miscellaneous: comprising all work not clearly covered by other headings, such as exhibitions, caravan sites, churches and church halls.

Repair and maintenance is defined to include the following:

  • Housing: including any conversion of, or extension to, any existing dwelling, and all other work such as improvement, renovation, refurbishment, planned maintenance, and any other type of expenditure on repairs or maintenance.

  • All other sectors: comprising any repair and maintenance work of any type, including planned and contractual maintenance.

The definitions used in this Report for the civil engineering sector are from the Department of the Environment, which broadly defines the sector as constituting infrastructure. A number of sectors are defined within this sector, comprising both public and privately financed projects.

The sectors include the following:

Water: comprising the construction of reservoirs, purification plants, dams, water works, pumping stations, water mains, hydraulic works and related construction activity.

Sewerage: comprising sewage disposal works, the laying of sewers and service drains.

Electricity: comprising building and civil engineering work for electrical undertakings, such as power stations, dams and other works on hydro-electric schemes, and any decommissioning of nuclear power stations.

Gas: comprising gas works, the laying of gas mains, and gas storage facilities.

Communications: comprising cabling for telecommunication and television facilities.

Air: comprising air terminals, runways, hangars, reception halls, and radar installations.

Harbours: comprising all works and buildings directly connected with harbours, wharfs, docks, piers, jetties, canals and water ways, sea walls, embankments and water defences.

Roads: comprising roads, pavements, bridges, footpaths, lighting, tunnels, flyovers and fencing.

There has been an increasing trend towards facilities management companies providing mechanical and electrical services, and an increasing number of mechanical and electrical contractors providing facilities management services. However, as such services are often bundled with others and provided under one facilities management contract, it is not always possible to analyse the value of the mechanical and electrical aspect of contracts. The value of such facilities management contracts may therefore not be included in this Report. Facilities management services are analysed separately in the MBD report, The UK Facilities Management Market Development.

All values quoted in this report are at current prices unless otherwise specified.

For the purposes of this Report, mechanical contracting in the new housing market includes heating and plumbing activity.

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