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Security Industry Market Review 2002
Key Note Publications Ltd, Oct 2002
TheTotal Market:
The UK market for security and fire protection was valued at £5.38bn at end-user prices in 2001. This figure, which includes services, equipment, installation and maintenance, represents a 3.8% increase over the value for the previous year.
The overall market has seen steady growth for several years, but performance has varied among its component sectors, as the following section shows.
Market Sectors:
The market for manned security services has increased in value each year since 1997. This is partly the result of rising labour, insurance and equipment costs, but there has also been some real growth in the market. The work of contract security staff is being extended into new areas, and there are opportunities to take on more of the work that is currently done by the police. Licensing of the manned-guarding sector is not due to start until 2003, but publicity about the need to exclude dishonest or untrained personnel appears to be influencing customers in favour of companies that have been inspected and approved by the relevant organisations. Recent legislation on wages and hours has also benefited the better companies.
Technological development continues at a fast pace in the market for electronic security systems, but equipment prices have been falling and the market's value has remained fairly flat. The downturn in the industrial client sector appears to have had a negative effect on this market.
Physical security equipment is also a fairly stable sector. Although there has been a fall in the output of new buildings since 1997, affecting the demand for domestic locks from the new-build sector, the replacement-lock sector has remained healthy.
The vehicle-security sector was affected by the downturn in UK vehicle production in 2000 and 2001, but it is expected to recover. Although the security standards of new cars have improved, the level of car crime in the UK is still high.
The market for fire-protection equipment grew very strongly between 1997 and 2001, as a result of stringent regulations and strong demand from high-risk sectors. This sector covers extinguishing equipment and materials, as well as detection and alarm systems, and includes installation and maintenance.
Consumer Research:
Our latest security survey, commissioned from Bmrb International, took place in August 2002 and repeated the questions asked in 2000. Consumers were asked about their ownership of certain kinds of security and fire-protection products, and about their purchasing of these products over the previous 12 months.
The results show a further increase in the penetration of window locks, from 81% of adults in 2000 to 83% in 2002. The insurance industry has played a large part in encouraging people to use this safeguard. The penetration of smoke alarms has also increased again, from 82% to 85% of adults, while 34% of the sample said that they owned a professionally installed burglar alarm, up from 31% in 2000.
Most of the other security measures seem to have reached a plateau in terms of consumer penetration, although purchasing levels remain quite high. More than half the sample had bought one or more of the listed security/fire-protection products during the year.
Market Leaders:
Although this diverse market still supports thousands of firms, consolidation is noticeable in most sectors. We estimate that eight corporate groups accounted for around 50% of the UK market in 2001. The top UK-based groups are Chubb PLC, Kidde PLC, Securicor PLC, Rentokil Initial PLC and Reliance Security Group PLC, all of which are in strong positions. Chubb and Kidde have successfully reorganised and repositioned themselves after the break-up of Williams PLC, which owned them both until 2000, and both have shown brisk acquisition activity. Leading foreign-owned groups include Tyco International Ltd, Securitas AB, and Group 4 Falck A/S.
Concentration continues among the manned-security companies, but the same group of leaders dominates. The fire-protection industry is fairly stable overall, led by several large international players. The electronic-security sector is served by a great many manufacturers, distributors and installers, and its access-control subsector remains very fragmented, although there have been many acquisitions between 2000 and 2002. Electronic vehicle security is another highly fragmented sector, while Assa Abloy AB of Sweden dominates the locks industry, and Gunnebo AB, another Swedish company, dominates the supply of safes.
Future Prospects:
We expect the market to grow at a rate of around 5% to 6% per year, at current prices, until at least 2006. Growth is expected to be strong for fire-protection equipment and manned security services, but only slight for electronic security systems and physical security equipment. In the case of electronic security, pressure on prices will continue to hold down value growth. The UK's output of new vehicles rose strongly in the first few months of 2002, which suggests that the vehicle-security market can expect some recovery, and we forecast overall growth for this sector.
An important influence on several security sectors, and on the fire-protection market, is the health of the industrial customer sector and the output of new industrial buildings. The prospects for 2002 and 2003 are not good in this respect, but there could be some stabilisation in 2004 as industrial markets improve. The short-term prospects for the output of housing, commercial-sector buildings and public-sector buildings, on the other hand, are very good, and this should counterbalance the downturn in the industrial sector.
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