UK electrical and HVAC manufacturers post sharp sales slowdown in Q2 2026
Trade association BEAMA‘s latest Market Pulse report has shown its manufacturers reporting a sales slowdown – with the sales balance falling from +23 in Q1 to just +4 for the second quarter.
Four in ten manufacturers reported operating at 70% capacity or below, with the average capacity utilisation falling to 73%, the joint-lowest level since the Covid pandemic. Only 11% reported operating above 90% capacity. Existing capacity would allow manufacturers to respond if demand recovers. In the meantime, underuse can weaken returns on previous investment and make further expansion harder to justify, BEAMA noted.
However, the investment and hiring intentions of the respondents remained positive, indicating that manufacturers retain the capacity and appetite to grow if demand improves.
Yselkla Farmer, CEO of BEAMA, said:
The growth we should be seeing from electrification is not reaching manufacturers. Businesses can produce more, but weak sales and unused capacity make it harder to invest with confidence. Construction is an immediate concern. The Construction Products Association forecasts a 3.3% fall in construction output this year, including a 10% fall in private housing and an 8% fall in private repair, maintenance and improvement. Together, these form a substantial market for the heat sector. Housebuilders have land, but planning and connection delays are still holding projects up. Warm Homes initiatives have yet to create the consumer demand the heat market needs.
She warned that manufacturers cannot invest on policy ambition alone:
Government now needs to turn its electrification commitments into demand. That means addressing the imbalance between electricity and gas prices and giving consumers a proposition that works for them. With more certainty about future orders, businesses will be better placed to follow through on their investment and hiring plans.”
The sales balance has fallen for two consecutive quarters, from +29 in Q4 2025 to +4 in Q2 2026. Manufacturers of Heating & Ventilation products reported a particularly sharp fall, to -22.2, following a neutral result in Q1. In contrast, Building Electrical Systems manufacturers recorded a positive balance of +33.3, although they reported slowdowns and cancelled projects across new-build construction and the repair, maintenance and improvement market. Business optimism among manufacturers supplying construction-linked markets remained negative, with Heating & Ventilation recording a balance of -25 and Building Electrical Systems -8.3.
Across BEAMA’s membership, business optimism improved from -28 in Q1 to -12 in Q2, but this remained below the results for 2024 and 2025.
Manufacturers still plan to invest despite weak sales and unused capacity, however. The balance expecting to ‘increase capital investment over the next 12 months’ rose from +47 in Q1 to +51 in Q2. Product improvement was the most frequently cited priority for capital at 70%, followed by plant and equipment at 65% and e-business, including AI, at 58%.
Hiring intentions remained positive at +39, showing manufacturers continue to plan job growth despite weak sales and unused capacity. Members continue to report difficulty fulfilling their recruitment plans because of shortages of skilled engineers and high labour costs.
Global cost pressures continue
Manufacturers also reported higher raw material costs and renewed supply-chain concerns. Copper was the most frequently cited material, followed by steel, brass, aluminium and PVC resin. While availability caused fewer problems than price, some respondents again reported difficulty sourcing chips, semiconductors and microprocessors.
Some members linked price increases to conflict in the Middle East and disruption to shipping. BEAMA also warned that new UK steel tariffs could add to costs for domestic product manufacturers.
- BEAMA is a partner of elementalLONDON, taking place on 25-26 November.
