Overall Market

The overall ventilation, air conditioning and non domestic heating market is estimated at approaching £1.2bn in 1998, with the performance of this market from 1990-2002 illustrated in the chart below:-

Overall Market for Ventilation, Air Conditioning and Non Domestic Heating

Source: AMA Research/Trade Estimates

The market developed rapidly in the mid to late 1980's, reaching a peak in 1990, but subsequently declined over the next 3 years due to the dramatic downturn in levels of construction during the recession.

Since 1994, the market has exhibited good growth, stimulated by the upturn in industrial and commercial new build and RMI, with the ventilation sector benefiting more recently from an improving housing market. The air conditioning sector has demonstrated particularly rapid growth.

The air conditioning sector has grown its share of the overall market to 35 percent, with increasing expectations of environmental comfort driving a trend towards these products. This has had some adverse effect on the heating and ventilation sectors, which take 16 percent and 15 percent respectively, although has benefited the accessories sector which has a 34 percent share.

The outlook in the short term future is one of modest decline in real terms, reflecting the forecast of a technical recession, albeit short lived. However, in the medium to longer term the market is expected to return to good growth, reflecting construction trends, as well as growing expectations of environmental comfort and increasingly stringent regulations relating to air quality and energy efficiency.

Ventilation

Ventilation products account for 15 percent of the overall market, with a value of £179m in 1998. Sales into the industrial and commercial sectors have shown good growth since 1994, due to a greater number of construction projects, as well as more stringent regulations relating to air quality.

The sector has also benefited from an upturn in the housing market, as well as a growing level of legislation relating to ventilation requirements in domestic kitchens and bathrooms.

Other factors influencing growth in ventilation products include improved insulation in commercial and domestic properties, as well as increased sales of added-value products. Increasing concern over environmental issues is motivating increased sales of products with heat recovery units incorporated. In addition, as air pollution increases particularly in inner city areas, there is wider usage of units with filters.

The key suppliers of ventilation products include Woods Air Movement., Vent Axia, Xpelair, NuAire and the Air Movement Group (who own Roof Units), with Woods, NuAire and the Air Movement Group having strength in the commercial and industrial sectors. Other competitors include Greenwood Air Management, Howden Sirocco, Silavent, Airflow and Matthews & Yates.

The major distribution outlets include Heating and Ventilating Distributors, Electrical Wholesalers, Builders Merchants and DIY multiples, as well as sales direct to end users and to OEMs.

Air Conditioning

The Air Conditioning sector accounts for 35 percent of the overall market, with a value of £418m in 1998, and has exhibited significant levels of growth over the last few years.

There has been a general increase in demand for air conditioning, driven by greater expectations of environmental comfort in the workplace and at home, and this, combined with the currently low penetration levels, is resulting in substantial market growth. In particular, there has been dramatic growth in packaged air conditioning systems, which currently account for some 54 percent of the overall market and are increasing in share at the expense of central station systems, due to their ease of retrofitting and lower unit prices.

Sales of air conditioning products are expected to continue to show good growth due to increasing penetration in existing buildings. In addition, it is anticipated that sales into the domestic sector will grow due to increasing expectations of comfort levels, with increased awareness in the medium to longer term, of the benefits of air conditioning as its penetration increases both in buildings and in cars.

However, the opportunities offered by this rapidly growing sector have encouraged a growing number of companies to enter the sector. This has resulted in a fiercely competitive market, with a consequent reduction in unit prices and this has adversely affected market growth.

The outlook for the sector is one of good growth in the medium to longer term, influenced by levels of non-commercial construction, as well as increasing penetration within existing buildings. However, price competition between the large number of suppliers is likely to have a negative impact at least in the short to medium term.

The air conditioning market is now led by the Toshiba Carrier Corporation, following the merger of Toshiba and Carrier in early 1999. However, the PAC (Packaged Air Conditioning) Systems sector is largely dominated by Japanese manufacturers including Daikin, Mitsubishi, Hitachi and Fujitsu. Other suppliers include IMI Air Conditioning, Airedale, Denco, Edenaire and Weatherite. Key companies supplying Central Station Systems include Carrier, AAF, Trane, Waterloo Air Management and York International.

Distribution of air conditioning systems varies significantly between PAC Systems and Central Systems. Packaged units are sold mainly via distributors, although contractors also account for some sales. Central systems are primarily distributed direct to contractors reflecting the fact that they are usually installed in new build application areas, although end users are playing an increasingly important role.

Non-Domestic Heating

Non Domestic Heating Sales account for around 16 percent of the overall market, with a value of £183m in 1998.

The sector consists of Commercial Boilers, Radiators, Heat Emitters and Direct Heating appliances.

Overall, this sector has shown some growth over the last few years having benefited from the upturn in levels of industrial and commercial construction. However, growth in sales of commercial boilers and radiators has been limited by reduced public sector expenditure, fierce price competition between manufacturers and growth in air conditioning products, which offer heating as well as cooling.

Heat Emitters have exhibited growth over the last few years, benefiting from the upturn in non-domestic construction, particularly retail outlets and light industrial/warehousing units.

The warm air heaters sector is heavily dependent on industrial application areas and therefore exhibited good growth during the mid 1990's, although this has slowed more recently, due to the impact of the strength of Sterling and the Asian economic crisis on the UK manufacturing industry. Despite also being reliant on the industrial sector, sales of radiant heaters have been particularly buoyant due to the trend towards more energy efficient products.

Key suppliers of boilers include NEI International Combustion, Babcock Wanson and Hamworthy Heating, as well as Caradon Ideal, Potterton and Clyde Combustion, The major manufacturers of radiators are Caradon Stelrad, Myson and Barlo who have strength in steel panel radiators. However, there has been growing usage of specialist products such as LST (Low Surface Temperature) and 'designer' radiators, with key suppliers including Hudevad, Rettig, PMP, Runtalrad and Zehnder.

Suppliers of heat emitters include Biddle Air Systems, Dunham Bush and Andrews, with warm air suppliers including Powrmatic, Benson, Youngman, Ambirad, Babcock Wanson and Andrews. Competitors in the radiant heating sector include Ambi-Rad, Hamworthy, Schwank, Gas Fired Products and Grayhill.

In terms of distribution, direct heaters are sold direct to end users, as well as being channelled through distributors and contractors, whilst indirect products are primarily sold direct to contractors, reflecting their more expensive slow moving nature.

Heating & Ventilating Accessories

Heating and Ventilating Accessories achieved sales of some £399m, accounting for 34 percent of the overall market. Ventilation and air conditioning accessories account for 64 percent of this total, with heating accessories taking the balance.

Sales of ventilation and air conditioning accessories have performed well, reflecting the growth in the air conditioning and ventilation markets, with key products being ducting, filters, grilles/diffusers/ registers, natural ventilators, fire/smoke/air control dampers, trickle ventilation and pressure attenuators/controllers. Filters have experienced good growth due to factors including concerns over legionnaires disease, increasing air pollution and growing antipathy towards cigarette smoke. The natural ventilation sector has exhibited good growth driven by the growing emphasis on energy saving, with increasing usage of 'passive stack ventilation' in Local Authority and Housing Association properties.

Heating Accessories were worth £142m, of which 74 percent was accounted for by building management systems, with the balance taken by programmers and thermostats. The sector has benefited significantly from the trend towards energy efficiency and this, combined with the need for efficient management of the growing array of building services, has resulted in particularly rapid growth in the Building Management Systems sector. These products are expected to continue to exhibit good growth, despite the short term forecast of an economic downturn, driven by the increasing emphasis placed on environmental considerations and energy efficiency.