Considerable improvements in the Electronic Security Market

Considerable improvements in the Electronic Security Market

The market for electronic security products and services has improved considerably since 2015, following several years of relatively poor performance, according to AMA Research.

The upturn began in 2015 and growth accelerated to 6% in 2016, driven by technological advancements that have led to increased replacement demand, along with an improving construction sector. Strong growth continued in 2017, despite the economic uncertainty, and indications are that this trend is continuing in 2018.

The UK electronic security market is mature, meaning that replacement demand is a key feature, and replacements account for the majority of end-user sales. RMI in the housing sector has increased in recent years, driven by growth in the home extensions segment and the ‘improve, don’t move’ trend.

Technological developments have been a key driver in the replacement market, particularly in the CCTV sector. Chinese manufacturers have shifted their focus from low pricing to R&D, which has stimulated product development in areas such as image quality, artificial intelligence, deep-learning analytics, cloud-based solutions, as well as integration with other security systems.

However, newbuild activity in key end use sectors such as offices, industrial and more recently, entertainment and leisure, has driven an increase in new installations, in particular for CCTV and access control products. Housebuilding has also grown considerably between 2015 and 2017, with output increasing by around one third.

Additionally, there remains considerable scope to expand the level of electronic security installations in homes. Intruder alarm penetration is estimated at around a third of homes, and the improved range and availability of CCTV products and smart locks etc, should support their wider installation in the residential market.

Intense competition is also a key feature of the market, and many established suppliers have struggled to maintain market share as overseas companies, in particular from China, have brought vast ranges of products to the market, often at lower prices. They have also begun to invest heavily in R&D, with some manufacturers reported to be achieving 10% R&D intensity - twice the typical rate for electrical products.

In terms of individual product sectors, CCTV remains the largest, accounting for over half of the market in 2017, in value terms. CCTV has also has seen the greatest levels of innovation and new product development in recent years, something which has eased the level of price competition in this sector over the last year or two.

In the access control sector, new product development and the wider availability of products have been key drivers of growth, as has the performance of the UK construction sector, particularly in commercial offices and housebuilding. In addition, access control products have not been subject to the price deflation experienced in other sectors, thereby enabling relatively consistent value growth.

The intruder alarm market, on the other hand, experiences long replacement cycles and a high level of competition in relation to other security options, particularly in the non-residential sector. In the residential sector, however, growth has remained positive, driven by increased housebuilding levels and product development aimed at offering easier installation. Going forward, the development of smart home products and integration with other security products and home management systems should offer good opportunities for value growth.

Future prospects for the electronic security sector overall are reasonably good in the short to medium term, with growth rates of 4-5% per year forecast until 2022. Value growth is likely to come from increasing adoption of new technologies in both the new and replacement sectors. While construction output growth is expected to ease over the next 2-3 years, output remains relatively high by historical standards and this should continue to provide opportunities for manufacturers and installers of electronic security equipment.

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