Thermal Insulation: Inc Impact of COVID-19 - UK - August 2020

OVERVIEW
What you need to know
Key issues covered in this Report
Covered in this Report
COVID-19: Market context
Economic and other assumptions
EXECUTIVE SUMMARY
Impact of COVID-19 on the UK thermal insulation market
Figure 1: Expected impact of COVID-19 on UK thermal insulation, short, medium and long term, 3 August 2020
The market
Cuts in government energy efficiency schemes hinder market growth
Figure 2: The UK market for thermal insulation, by sector, 2015-19
UK building thermal insulation sector contracts by an estimated 4% in 2019
Figure 3: UK market for building thermal insulation, by type, 2019, (£ million)
Demand for industrial thermal insulation falls in 2019 amid prolonged economic uncertainties
Market set for strong growth in 2021 on the back of the government’s green recovery package
Figure 4: Forecast UK market for thermal insulation, by sector, 2020-24
Companies and brands
Major firms adopt digital innovations
What we think
COVID-19 AND THERMAL INSULATION
Impact on the market
Government’s £3 billion green investment package set to revive retro-fit sector
Thermal insulation demand in new housebuilding sector set to recover relatively quickly
Impact of COVID-19 on commercial construction is set to be more significant and long term
Impact on companies and brands
The halt-to-business due to COVID-19 hits companies’ finances
COVID-19: Market context
ISSUES AND INSIGHTS 
Government’s £3 billion energy efficiency package needs to be part of a more comprehensive, long-term plan to avoid return to boom and bust in the energy efficiency industry
“Whole house” approach to retro-fitting required to bring all homes up to EPC Band C by 2035 and progress towards the 2050 net zero target
THE MARKET – WHAT YOU NEED TO KNOW
Cuts in government energy efficiency schemes hinder market growth
UK building thermal insulation sector contracts by an estimated 4% in 2019
Reduced demand for industrial thermal insulation in 2019
Market set for strong growth in 2021 on the back of the government’s green recovery package
MARKET SIZE
Overview
UK thermal insulation market declines by an estimated 3% in 2019
Figure 5: The UK market for thermal insulation, 2015-19
Figure 6: UK market for thermal insulation, 2015-19
Building thermal insulation represents vast majority of market
Figure 7: Segmentation of the UK market for thermal insulation, by sector, 2015-19
MARKET SEGMENTATION
Building thermal insulation
Funding cuts to home energy efficiency schemes have detrimental effect on thermal insulation demand
UK building thermal insulation sector contracts by an estimated 4% in 2019
Figure 8: UK market for building thermal insulation, 2015-19
Segmentation by type of building thermal insulation
Key building insulation measures struggle to achieve growth
Figure 9: UK market for building thermal insulation, by type of insulation, 2015-19
Figure 10: UK market for building thermal insulation, by type of insulation, 2015-19
Cavity wall insulation
30% of homes with cavity walls remain uninsulated
Cavity wall insulation demand suppressed due to cuts in government energy efficiency schemes
Figure 11: UK market for cavity wall insulation, 2015-19
Figure 12: UK market for cavity wall insulation, 2015-19
Loft insulation
Eight million lofts still uninsulated
Majority of loft insulation is mineral and glass wool produced in blanket rolls
UK market for loft insulation shows moderate growth in 2019
Figure 13: UK market for loft insulation, 2015-19
Figure 14: UK market for loft insulation, 2015-19
Draught proofing
Figure 15: UK market for draught proofing, 2015-19
Roof insulation
Roof insulation benefits from increased demand for loft conversions in domestic sector
Pitched roofing accounts for largest element of roof insulation
Roof insulation market up by an estimated 4% in 2019
Figure 16: UK market for roof insulation, 2015-19
External wall insulation
Nine out 10 of homes with solid walls remain uninsulated
Government cuts solid wall insulation minimum target for ECO3 (December 2018-March 2022)
External wall insulation market declines by 68% in the five-year period to 2019
Figure 17: UK market for external wall insulation, 2015-19
Internal wall insulation
Materials used for internal wall insulation
ECO3 scheme boosts demand for internal wall insulation in 2019
Figure 18: UK market for internal wall insulation, 2015-19
Pipe and cylinder lagging
Demand for pipe and cylinder lagging demonstrates relatively consistent growth
Figure 19: UK market for pipe & cylinder lagging, 2015-19
Floor insulation
Floor insulation market grew by an estimated 13% in 2019
Figure 20: UK market for floor insulation, 2014-18
Industrial thermal insulation market
Demand for industrial thermal insulation falls in 2019 amid prolonged economic uncertainties
Figure 21: UK market for industrial thermal insulation, 2015-19
Industrial thermal insulation by material
Figure 22: UK market for industrial thermal insulation, by material, 2019
Figure 23: UK market for industrial thermal insulation, by type, 2019
Industrial thermal insulation market by end user
Figure 24: UK market for industrial thermal insulation, by end use sector, 2019
MARKET FORECAST
The impact of COVID-19
Figure 25: Expected impact of COVID-19 on UK thermal insulation, short, medium and long term, 3 August 2020
Government’s new £3 billion green investment package set to revive retro-fit sector
Market set for strong growth in 2021 on the back of the government’s green recovery package
Figure 26: Forecast UK market for thermal insulation, 2020-24
Figure 27: Forecast UK market for thermal insulation, 2020-24
Figure 28: Forecast segmentation of the UK market for thermal insulation, by sector, 2020-24
Building thermal insulation forecast
Figure 29: Forecast for UK market for building thermal insulation, by type, 2020-24
Figure 30: Forecast for UK market for building thermal insulation, by type, 2020-24
SUPPLY SOURCES
UK production of thermal insulation materials is on the up
Figure 31: UK production of selected thermal insulation materials, 2015-19
Figure 32: Segmentation of the UK production of selected thermal insulation materials, by material, 2015-19
Figure 33: Segmentation of the UK production of selected thermal insulation materials, by material, 2019
Recent investments at UK insulation material manufacturing plants
Trends in imports
Figure 34: UK imports of selected thermal insulation materials, 2015-19
Figure 35: Segmentation of UK imports of selected thermal insulation materials, by material, 2015-19
Trends in exports
Figure 36: UK exports of selected thermal insulation materials, 2015-19
Figure 37: Segmentation of UK exports of thermal insulation materials, by material, 2015-19
Figure 38: UK trade surplus/deficit in thermal insulation materials, by material, 2015-19
STRUCTURE OF DISTRIBUTION NETWORK
Overview
Majority of building insulation sales pass through insulation distributors
MARKET TRENDS
More eco-friendly and sustainable building thermal insulation materials are being developed
New super insulating materials launched, but focus remains on conventional materials
Innovative, tech-based solutions enable more efficient and less disruptive insulation installation
Kingspan’s Kooltherm® K-range claims to comprise the thinnest commonly used insulation products for any specific U-value
Jablite offers All-in-One Thermal Floor system
Robotic insulation solution Q-bot enables more efficient and less disruptive underfloor insulation installation
WHISCERS™ provides faster, better, cost-effective and low-mess internal wall insulation for hard-to-treat properties
Knauf Insulation develops technology that uses machine-learning systems to enhance performance of Energy Performance Certificates
“Whole house” approach to retro-fitting required to help UK housing stock advance towards net zero target
NIA calls on the government to use “whole-house” and street-by-street approach to home energy efficiency upgrades
REGULATORY AND LEGISLATIVE ENVIRONMENT
Building regulations
Future Homes Standard proposes a 31% reduction in emissions from new homes from 2025
Government bans combustible material on high-rise homes
Government commitment to reduce carbon emissions
2017 Clean Growth Strategy puts better insulated homes back on government agenda
But policy progress urgently needed to meet the government’s home energy efficiency ambitions
CCC urges government to embark on major green investment drive to deliver resilient recovery from COVID-19
Energy supplier obligation initiatives to improve energy efficiency of domestic homes
ECO scheme now entirely focused on fuel-poor and low-income homes
Figure 39: Modelled uptake of energy efficiency measures in ECO3, October 2018-March 2022
Each Home Counts Review aims to improve quality and standards for retro-fit energy efficiency installations
From January 2020, all ECO3 measures must be delivered by TrustMark-registered businesses
Minimum Energy Efficiency Standards for private rented sector
Enhanced Capital Allowance Scheme ends in April 2020
MARKET DRIVERS
Housing stock characteristics
Figure 40: Number of UK households, 1991-19
Figure 41: Government predictions of the number of households in the UK, 2020-35
Figure 42: Housing stock distribution in England, by age, 2018
Figure 43: Housing stock distribution in England, by age and tenure, 2018
Figure 44: Housing stock analysis for England, by type, 2018
Figure 45: Housing stock distribution in Scotland by age, 2018
Figure 46: Housing stock analysis for Scotland, by type, 2018
Private rented sector offers opportunities for thermal insulation installers
Figure 47: UK home ownership trends, 2008-18
Energy efficiency of English homes has increased over last decade, but rate of improvement has slowed since 2014
Figure 48: Energy efficiency rating bands of English dwellings, by tenure, 2018, (% of dwellings)
Government policies to boost energy efficiency of UK homes
Government launches new innovation funds to cut cost of home retro-fit measures and boost take-up
£3 billion green investment package announced as part of economic recovery plan
Current insulation levels in housing stock, and remaining potential
Figure 49: Remaining potential to insulate the housing stock in GB, December 2019
Construction activity
Doubling of growth in 2019
Figure 50: The construction market, 2015-19
Figure 51: Comparison of new construction and R&M output, 2015-19
Sector specific development
Figure 52: Segmentation of new construction activity, 2019 (£ billion)
Figure 53: Segmentation of R&M activity, 2019 (£ billion)
COVID-19 to strongly reduce activity in 2020
Figure 54: Forecast construction market compared with expectations prior to COVID-19, 2020-2024
Housing – government targets are challenging
Figure 55: Forecast new housing construction market compared with expectations prior to COVID-19, 2020-2024
Short term impact of COVID-19 on R&M
Figure 56: Forecast R&M construction market compared with expectations prior to COVID-19, 2020-2024
Government energy efficiency schemes drive retro-fit building thermal insulation measures
8% of households had a measure installed under ECO scheme
Figure 57: Number of key insulation ECO measures installed, by measure type, Q1 2014-Q4 2019
Figure 58: Number of key insulation ECO measures installed, by measure type, 2014-19
In ECO3, share of insulation measures falls due to rise in heating measures
Figure 59: Number of insulation ECO measures installed, by obligation, January 2013 to April 2020
Figure 60: Key insulation ECO measures installed, by measure type, January 2013 to April 2020
Drivers in heating and ventilation sector
Drivers for process plant investment
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
The halt-to-business due to COVID-19 hits companies’ finances
Kingspan Group opens global innovation centre
Major firms adopt digital innovations
Sustainability plays increasingly important role in insulation solutions and wider business strategies
Manufacturers’ investment in UK production facilities suggests optimism in UK market
INDUSTRY STRUCTURE
Industry development
Figure 61: Analysis of changes in the other non-metallic mineral products manufacturing industry, 2015-19
Figure 62: Analysis of changes in the glass fibres manufacturing industry, 2015-19
Structure by employment
Figure 63: Analysis of the employment structure of the other non-metallic mineral products manufacturing industry, 2018 and 2019
Figure 64: Analysis of the employment structure of the glass fibres manufacturing industry, 2018 and 2019
Structure by turnover
Figure 65: Analysis of the financial structure of the other non-metallic mineral products manufacturing industry, 2018 and 2019
Figure 66: Analysis of the financial structure of the glass fibres manufacturing industry, 2018 and 2019
COMPANY PROFILES
Encon Insulation
Recent activity
Financial performance
Figure 67: Financial analysis of Encon Insulation, 2015-19
Company outlook
Jablite
Product innovation
Company strategy
Financial performance
Figure 68: Financial analysis of Jablite, 2014-18
Kingspan Insulation
Recent activity
Kingspan Group opens global innovation centre
Financial performance
Figure 69: Financial analysis of Kingspan Insulation, 2014-18
Company strategy
Knauf Insulation
Recent activity
Financial performance
Figure 70: Financial analysis of Knauf Insulation, 2014-18
Rockwool
Company strategy
Financial performance
Figure 71: Financial analysis of Rockwool, 2014-18
SIG
SIG sells divisions to focus on insulation and interiors product distribution and merchanting roofing and exteriors product
Sale of SIG’s Building Solutions business to Kingspan abandoned
SIG proposes capital raise of £165 million to strengthen capital structure, provide liquidity and deliver the group's new strategy
Initial impact of COVID-19
SIG launches new customer-centric strategy
Financial performance
Figure 72: Financial analysis of SIG, 2015-19
Superglass Holdings
Major upgrade of UK manufacturing facility completed
Financial performance
Figure 73: Financial analysis of Superglass Holdings, 2014-18
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Methodology
FURTHER SOURCES AND CONTACTS
Trade associations
Trade magazines
Trade events