M&E turnover climbs above £6bn

Turnover among the UK's largest mechanical and electrical contractors has climbed above £6bn as demand from data centres and other mission-critical sectors helps the industry recover from its post-pandemic downturn.

The Building Engineering Services Association (BESA) said collective turnover among firms covered by its latest Top 30 UK M&E Contractors report has increased from £4.7bn following the pandemic to more than £6bn.

Data centres and wider digital infrastructure have played a significant role in that growth, alongside healthcare, defence, the energy transition and increasing demand associated with compliance with building safety legislation.

Gokhan Hassan, managing director of GHCS and GH Engage, which carried out the financial research for the report, said: “Since recovering from Covid in 2022/23 the collective turnover figure has risen from £4.7bn to more than £6bn which coincides with the explosion of the mission critical sector.”

The performance is not uniform across construction markets, however. A decline in residential work has affected parts of the M&E industry and contributed to the failure of some established businesses.

Office construction and fit-out are providing a steadier source of work, while BESA also identifies the return of PFI assets to the NHS estate as a significant potential market for refurbishment and retrofit.

Building safety regulation is another factor reshaping demand and working practices across the sector.

BESA president-elect Anna Shephard said legislation had increased the emphasis on clearly defined responsibilities, record keeping and demonstrating how safety is managed throughout a project.

“Legislation has increased the focus on clear roles, good record keeping and being able to show how safety is managed throughout a project,” she said. “We focus on three things: competence, compliance, and accountability, which helps build trust and ensures safety is at the centre of every project.”

The report also points to changing procurement and delivery models as contractors respond to increasingly complex projects.

Some firms are moving away from traditional lowest-price approaches to tendering and investing in innovation and more efficient design and delivery processes. Earlier engagement with contractors is also becoming more important, particularly across digital infrastructure, defence and healthcare projects.

Despite the improving workload, commercial pressures remain. Contractors surveyed by BESA reported continued difficulty protecting margins and cash flow as persistent inflation combines with fixed-price contracts and project delays.

As a result, some M&E businesses are becoming more selective about the projects they pursue, concentrating on markets offering longer-term and more resilient pipelines such as mission-critical infrastructure and retrofit.

Payment practices could also become increasingly important to the sector. BESA said proposed legislation to outlaw retentions and address unfair payment practices could help protect contractor cash flow and reduce insolvency risk, particularly among smaller businesses.

BESA chief executive David Frise said: “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.”

The report suggests that the combination of regulation and changing construction markets is increasing the importance of building services within major projects. M&E engineering now accounts for more than half the value of thousands of projects across areas including digital infrastructure, healthcare, education and life sciences.

While demand is strengthening, the findings also underline the challenge facing contractors: converting a growing pipeline of technically complex work into profitable projects while managing inflation, payment risk and increasingly demanding regulatory requirements.