After a difficult five years of downturn in the mechanical and electrical sector, the market is beginning to look brighter as the benefits of recovery in the construction industry filter throughout the supply chain.
Main contractors are more optimistic and the lag behind them for M&E Contractors is generally about 12 to 18 months. There is more work out there and less appetite to bid for work at reduced rates.”
It could be anywhere from 2017 to 2022 when we recover to 2008 levels
Long recovery ahead
It serves as a reminder that the sector is not out of the woods yet, and of the challenges contractors will continue to face in the next year while delivering jobs bid at lower prices in a rising market.
The market has contracted by as much as 30 per cent [since 2008], which is why some of the bigger companies are struggling. When you look forward, it will be anywhere from 2017 to 2022 when we recover to those 2008 levels.”
For M&E contractors, workloads are increasing in the commercial, industrial and energy sectors, both in London and the South-east, and across the country.
Infrastructure is also set to grow over the next few years as the government invests in improving the UK’s transport and energy infrastructure.
M&E firms are seeing growing opportunities in client and consultancy services, such as advising customers on reducing their energy consumption and driving down the associated costs, as well as making their businesses more sustainable.
Spreading out to survive
Contractors including NG Bailey and Spie UK say they have survived by diversifying their businesses into engineering services and facilities management, as well as providing traditional M&E services to building contractors.
Whilst E&B have offered services to the likes of Spie UK the thrust of the business remains focused on working directly for end-user customers as well as subcontracting to main contractors.
Increasingly customers are coming to market and wanting a turnkey role from the supplier and wanting it direct.
E&B still see competitive tendering as providing value within the cost criteria. We abide by the belief that the lowest bid does not necessarily provide the best value and that clients are more aware of this going forward.
M&E specialists, like all other contractors, are grappling with the impact of rising labour and materials costs on already slim margins.
A shortage of skilled people in the industry will also present a challenge for firms as workloads pick up, with a need for increasing recruitment and training budgets.
E&B will continue, in 2015, to prioritise winning repeat business, invest in skills and identify new markets to enter.