A new report has highlighted ‘impressive resilience’ from the mechanical & electrical (M&E) contracting market in the face of challenging economic conditions.
The findings are revealed in the Building Engineering Services Association’s (BESA) annual survey of the largest firms in the sector.
The report shows that data centres and the digital infrastructure market are helping to drive growth, along with healthcare, defence, energy transition and the push for compliance with building safety legislation. However, a fall in residential work has held back parts of the industry and led to the collapse of some long-established businesses.
Office construction and fit-out is said to be providing a ‘steady pipeline’ of work, with new entrants into these markets held up as evidence of sector resilience. PFI ‘hand backs’ to the NHS estate are also creating refurbishment and retrofit opportunities.
“We have been in a state of flux for some years now,” said Gokhan Hassan, MD of GHCS and GH Engage, which carried out the financial research for the report. “Since recovering from Covid in 2022/23 the collective turnover figure has risen from £4.7 billion to more than £6 billion which coincides with the explosion of the mission critical sector.”
Other factors to emerge from the report include the importance of investing in innovation and improving the efficiency of processes to keep up with the demands of clients in the digital, defence and healthcare markets. Many firms say they have moved on from the traditional ‘first past the post’ approach to tenders and are improving efficiency in design and delivery.
“This is an exciting time for our industry,” said BESA CEO David Frise. “There is great demand out there for high-quality building engineering work and the challenge of turning opportunity into business success is also driving companies to be more innovative.
“M&E engineering is central to so many vital services and our companies are delivering more than 50% of the value of thousands of critical projects including digital infrastructure, healthcare, education and life sciences. This year’s report also shows there is even more potential out there for our companies’ expertise.”
BESA president-elect Anna Shephard said the report demonstrated the importance of focusing on apprenticeships and early talent, and making sure new entrants started off on the right path and developed the right behaviours.
“Legislation has increased the focus on clear roles, good record keeping and being able to show how safety is managed throughout a project,” she added. “We focus on three things: competence, compliance, and accountability, which helps build trust and ensures safety is at the centre of every project.”
However, several of the firms featured in the report said protecting margins and cash flow continued to be challenging due to persistent inflation, coupled with fixed-price contracts and project delays. As a result, M&E contractors are now being more selective about the work they take on. Several also highlighted the importance of proposed legislation to outlaw retentions and crack down on unfair payment practices.
“This could provide much needed relief to many of the SMEs in our sector and would be the culmination of decades of hard work by a generation of BESA members and staff,” David Frise stated. “This is an important and exciting moment to be part of this crucial industry.”
You can download the Top 30 Report here.
