Brexit uncertainty hits UK market

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Published: 09 May 2017


Uncertainty over the decision to leave the European Union and the fall of the pound to its lowest point in more than 30 years left the UK out of step as most of the European air conditioning market enjoyed strong gains in 2016.
​According to the recently-published BSRIA market intelligence study on the global AC market, the European market grew by 13% in 2016 after sluggish performance in the last few years. Economic recovery in most European countries, combined with the heatwave in southern Europe and replenishment of stocks, resulted in a strong growth. 

The study adds: “Growth was evident in most of the large air conditioning markets in Europe, apart from the UK. The vote to leave the European Union caused a lot of uncertainty and the British pound fell to its lowest in the last 31 years. Overall there was a lack of demand for office spaces and those projects which were near completion were also pushed back due to uncertainty about tenant demand, impacting on completion dates and consequently the purchase and installation of air conditioning.’’
 
Overall, the global AC market contracted by 1% in value terms in 2016, compared with a drop of 5% in 2015, and was not as bad as was initially expected. The Chinese market saw a late recovery supported by hot weather and the government’s issue of a new five-year plan, which boosted sales. Brazil and Saudi Arabia were the other main contributors to the negative growth.
 
The global AC market was valued as US$92.6 billion, with packaged products accounting for almost 85% of the value. 
 
The biggest packaged air conditioning market is Asia Pacific, accounting for some 60% of the world market by volume. The market declined by 1% in 2016, a lower figure than previously expected; positive developments in China in the second half of the year saved the market from falling further.
 
The central plant markets performed poorly with the exception of the Americas. The US, which is the second biggest central plant market, showed moderate growth. The slowdown in investments in industrial new construction and the low growth in healthcare and education restricted further market expansion. At the other end, the demand in the commercial office and hospitality verticals remained strong, leading to some growth.
    
Moveables
Total sales of moveables for 2016 are estimated at some two million units representing an increase of 15 per cent compared to 2015, with a value of US$563 million. The US is the biggest moveables market, accounting for more than half of the global sales and saw a 29% boost in the market. This was partly driven by favourable weather conditions, but also the availability of very competitively priced units.
  
Windows/through the wall
The global windows/through the wall market dropped by 2% in volume. The market reduced to almost 12 million units and US$2.4 billion in 2016. However, this product is becoming obsolete in many countries as splits products continue to take share.
  
Splits
Split systems represent the biggest segment of the world air conditioning market, comprising over 80% of the market in volume terms. Among the splits, multi splits account for 3% and VRF accounts for 14% of the global market in 2016 in value terms. The total splits market has reached just over 100 million units, a one per cent drop compared with 2015, with a corresponding value of US$70 billion in 2016.
 
The uptake of inverter technology accelerated across many markets in 2016. The majority of Europe is now nearly 100% inverter, with the exception of Russia where legislation does not encourage inverters and the tough economic conditions means the market is dominated by low cost products.
   
Rooftops
The global rooftops market was estimated at around 1.2 million units with a corresponding value of around four billion units representing a 1% drop compared to 2015 in volume terms. The US and Canada are by far the biggest two markets accounting for nearly 90% of the global sales in 2016. 
 
This product heavily relies on certain verticals such as retail and fast food service restaurants. As online trading continues to take market share from the high street, the growth will be limited in this market. The global market is expected to show a modest growth of 2.6% CAGR in volume terms between 2015 and 2021.
 
Central plant
The global chiller and airside market was valued as US$14.5 billion, representing a 2% drop compared with 2015. Chillers represented some 50% of the central plant market by value in 2016. The Americas region was the only continent that recorded any growth thanks to strong performance in the US market.
 
Although economic growth is evident in many regions, the projects to get to the purchasing stage of building services is taking time and the market has continued to suffer from a lack of new commercial construction.
 
For more information on the availability and costs of BSRIA’s reports, contact Mike Vardanian, mike.vardanian@bsria.co.uk; +44 (0) 1344 465 630 or visit www.bsria.co.uk/wm