Executive Summary

The UK office furniture market was estimated to be worth £830m at manufacturers' selling prices (msp) in 1997. The industry has enjoyed significant growth in recent years, having been hard hit by the recession in the early 1990s. Nonetheless, with customers continuing to be frugal in their occupation of office space, and shifts in working practice allowing for more productive use of existing furniture, the outlook for the industry is mixed, particularly as surplus capacity continues to restrain profitability.

The market falls into three main sectors: desks and tables, seating, and storage. Desks and tables is the largest sector, accounting for around 45% of the market's value, with seating representing a further 30%. However, it is the seating sector which has shown the strongest growth, mainly as a result of new legislation which demands adjustable seating for visual display unit (VDU) operators. The storage sector has declined in value, as electronic storage media has become increasingly common.

One of the most important trends affecting the market in recent years has been the move towards home working. The advent of low-cost computer equipment and the advance in telecommunications technology have enabled many more people in professional service-based industries to work from home. At the same time, companies are increasingly outsourcing non-core business activities to temporary or contract personnel. The emphasis in the office furniture industry is, therefore, shifting away from large organisations towards smaller business units. Other changes in working practice are also having a significant effect on the industry. Concepts such as `hot desking' will result in more efficient use of existing office furniture, while also offering increased opportunities for new furniture designs.

Paradoxically, the lifespan of office furniture is providing an additional threat to the industry. The increasing number of small business customers has expanded the market for second-hand and reconditioned furniture (which generally becomes available through office refurbishment and bankruptcies). This has inevitably introduced further pricing pressures into the industry.

Key Note estimates that the market will grow by around 9% in 1998, as the economy continues to expand and industrial confidence returns. However, once latent demand has been satisfied, 1998 could represent the high water mark for the industry. Although market size will continue to grow, pressure on margins will increase and the intensity of competition will be manifested in higher levels of industry consolidation.

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