The UK Genset Industry is currently experiencing a period of mixed trading conditions with a flat or relatively stable home market supported by expanding export activity in certain overseas markets. A relatively small number of predominantly American-owned companies tend to dominate UK genset production with a trend to higher levels of market consolidation reflecting restructuring and withdrawals from the market with highly competitive market conditions, which have in turn tended to depress margins and profitability in overall terms. The total market in 2004 is estimated to be worth some ?48m at manufacturers? selling prices, which is similar to 2002-2003, indicating relatively stable market conditions in the UK. Positive demand in 1999 and 2000 reflected an improving UK economy and motivation from the completion of Millennium projects, expansion of network data infrastructures, mobile telecommunication, internet trading, credit cards, banking etc. However, there was a recession in the data network infrastructure and telecom sectors in 2001 and 2002, which resulted in a drop in demand for generators from this sector. This contributed to a reduction in generator set market size reflecting the high degree of influence this end-use sector had exerted on the genset market, in terms of capital investment, as well as direct application from IT and support systems which required electrical back up. The genset market has continued to be relatively stable from 2002-2004 with the market supported to some extent by the increasing levels of capital expenditure committed through the public sector, often via PFI programmes, leading to greater levels of construction in the public health and education sectors in particular. In addition, retail and leisure construction programmes have been relatively positive, and domestic building and construction has shifted towards a higher level of flat and apartment building, which has in some cases led to greater generator usage. The office building and refurbishment sector and the IT/internet sectors have remained relatively flat over the last 2-3 years. Over the next few years the market is expected to show marginal growth, at between 2-4%. This reflects the greater level of building and construction which is forecast in a number of areas. The public sector construction programme is expected to continue to increase, driven by government commitments to greater capital expenditure in health and education, but also in a number of other public sectors. In addition, there is likely to be an increasing impact from the successful Olympics bid, and the significant required building programme for stadia, office buildings, lighting, as well as the significant legacy expenditure which is expected. Viewed in the global context it is likely that the UK genset industry will continue to demonstrate underlying growth trends in the long term, motivated by exports to countries which are in either the primary or secondary stages of development, or which are experiencing power shortages of a severe nature, for example, China. It is forecast that long-term expansion of the UK genset market will be driven by: Generally increasing electrical load in the UK, reflecting long term trends to increasing computerisation, and air-conditioning systems in offices, which will provide additional opportunities for standby and baseload in overall terms. Extension in high quality power applications, and certain cooling operations, requiring generator back-up, including semi-conductor 300mm wafers and flat panel LCD抯, 3G, development of 2nd generation broadband, ADSL2, etc. Expansion of generator opportunities to the REC抯 including multiple set mini power stations, the provision of temporary rental power during power cuts, maintenance periods, etc. with underlying growth factors including an ageing infrastructure and financial penalties for lengthy periods of power restoration. Low level underlying growth in the rental sector motivated by infrastructure, also health and education government funding. Growth in gensets for cabins motivated by trends to self-containment, remote operation and a higher level of welfare, comfort and security. Growth in gensets to provide an independent power source for containerised/trailerised boiler rooms in the expanding boiler hire sector. The greater use of just in time building and construction processes and their requirements for temporary power. The development of small inverter generators for powering computers and the use of small generators for powering selective appliances eg lighting, during electricity cuts will represent a positive factor, but in overall market terms a relatively limited factor given the low unit value of small sets. The rebuilding of the infrastructure in Iraq, and Afghanistan tends to provide opportunities for a range of sizes of gensets for prime and specialist sectors. Growth projections for the UK generating set market should take account of the following adverse influences: The adverse impact on margins of rising oil, electricity, gas, water and steel prices. Continuing forecast weak performance of the engineering and manufacturing sectors which will tend to reduce genset opportunities in the medium and long term. Long term low level erosion of the UK genset market due to the migration of customer sectors overseas. The impact of the strength of the dollar, which is adversely affecting competitiveness in overseas markets. The oil storage regulations, effective from September 2005, may tend to result in additional costs of compliance for owners, operators and manufacturers of diesel generators. The period 2003-2005 has witnessed highly competitive market conditions and cost escalation culminating in restructuring, the migration of production overseas and a refocusing on more specialist, added value market sectors ?for example genset control and upgrading, power quality upgrades, whilst certain manufacturers decided to withdraw from the genset market entirely. Continuing low levels of profitability are also a characteristic of the recent history of the UK genset market. Cumulatively, all these trends have tended to result in higher levels of industry concentration. Under the present set of flat market conditions, manufacturers of gensets may need to consider an extended range of specialist end use sectors for example gensets for off shore wind farm transformer substations, disaster recovery, lighting, welding and power, landfill gas power generation, portable self contained and mobile cabins and boiler rooms. Bespoke power projects and power upgrades, also represent areas of opportunity, particularly in the semi-conductor and related industries. Market influences also include trends in the major end-use sectors such as industrial/manufacturing, previously mentioned, construction, oil and gas, water and sewage, marine, and domestic and leisure. Whilst some sectors are growing, others are stable or declining. Marine, oil and gas have shown relatively little growth and are not likely to grow much in the near future, reflecting the situation in the 憀ocal? oil industry. Projected applications in construction are viewed as positive, particularly driven by government spending and the Olympic bid success. Domestic and leisure has also to a small extent been motivated by inverter generations and the low level of prices of Chinese 2kv suitcase generators, etc. Major suppliers to the UK genset market include FG Wilson Engineering, Cummins Power Generation, Caterpillar, Broadcrown, Briggs and Stratton, SDMO, Honda, Lister Petter and others. The distribution of gensets in the UK is served by a number of outlets including Dealers, Industrial Distributors, Manufacturers?Agents, Genset specialists, Plant and Tool Hire companies, Direct/OEM, Marine and Agriculture, DIY Superstores. The key sectors of the UK genset market consist of 慚ainline?Generating Sets and their derivatives including Marine Generating Sets, Co-generation/CHP sets, small industrial domestic and leisure sets, Ground Power Units, Welder Generators and Lighting Generators. Future annual prospects for the UK genset industry are viewed as relatively positive in the long term with modest annual growth of around 2-4%, supported by a buoyant export trade.