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AM31030 AMA PANEL BUILDERS MARKET JUNE 2000

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KEY POINTS

The report covers custom-made distribution panels, and control panels for process control, building management, safety systems and motor control centres.

The market is substantial at over £500m, and prospects for future development are favourable in the water and power sectors, network infrastructure for data communications, etc., although the shift away from manufacturing in the UK is likely to result in a more limited demand for process control panels and motor control centres.

Key areas covered in detail include:-

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TABLE OF CONTENTS

The UK Panel Builders Market 2000

Page
1. INTRODUCTION
5
2. SUMMARY
7
2.1 The Market
7
2.2 Companies
8
2.3 Applications
9
2.4 Buying Process
10
2.5 Component Trends
11
3. ECONOMIC ENVIRONMENT
12
3.1 Introduction
12
3.2 GDP Growth
12
3.3 Interest Rates and Inflation
12
3.4 Sterling
13
3.5 Conclusion
13
4. THE UK PANEL BUILDING MARKET
14
4.1 Definition
14
4.2 Market Size
14
4.3 Market Structure
20
4.4 Companies
23
4.5 Strengths, Weaknesses, Opportunities & Threats
30
4.5.1 Strengths
30
4.5.2 Weaknesses
30
4.5.3 Opportunities
31
4.5.4 Threats
31
5. PANEL BUILDERS OUTPUT
34
5.1 Mix Of Sales
34
5.1.1 End Uses
34
5.1.2 Mix of Panel Builders’ Activities
36
5.2 Panel Builders Customers
37
5.3 Imports & Exports
42
6. BUYING AND SPECIFICATION PROCESS
44
6.1 Introduction
44
6.2 Specification Process
46
6.2.1 Specification Standards
46
6.2.2 Brand Specification
47
6.2.3 Influences On Brand Choice
51
6.2.4 Information Sources Used
52
6.3 Responsibility For Purchase
54
6.4 Source of Supply
55
6.4.1 Supply Sources Used
55
6.4.2 Factors Influencing Choice of Supplier
57
6.5 Electrical Wholesalers
59
6.5.1 Product Range and Stock Levels
59
6.5.2 Edmundson Electrical Ltd
62
6.5.3 Newey & Eyre Group Ltd
62
6.5.4 City Electrical Factors
63
6.5.5 Senate Electrical Wholesalers Ltd
63
6.5.6 Electrical Plc
64
6.5.7 Denmans Electrical Wholesalers Ltd
64
6.5.8 Others
64
6.6 Specialist Wholesalers and Distributors
64
6.6.1 Parmlem Graham
65
6.6.2 HT Electrical
65
6.6.3 GAP Distributors
65
6.6.4 Contelec Supplies
65
6.6.5 Edwardes Bros
65
6.6.6 A J Hurst
65
6.6.7 Nyquist Electrical Components
66
6.6.8 Underwoods
66
6.6.9 IMO
66
6.6.10 Routeco
66
6.7 Electronic Component Distributors
66
6.7.1 RS Components
67
6.7.2 Farnell
67
6.8 Direct Distribution
69
7. PRODUCT USAGE
69
7.1 Overall Product Usage
69
7.2 Enclosures
73
7.3 Circuit Protection and Disconnectors
75
7.4 Automation Products
77
7.5 Control Gear
79
7.6 Power Direction Products
82
7.7 Other Products
83
7.8 Suppliers
83
7.8.1 Companies
83
7.8.2 Enclosures
87
7.8.3 Circuit Protection Devices
87
7.8.4 Automation and Control Products
88
7.8.5 Power Direction Products
88
8. KEY MARKET INFLUENCES
89
8.1 UK Economy
89
8.2 Construction
89
8.3 Industrial Sectors
92
8.3.1 Fixed Investment in Engineering Manufacturing Industry
92
8.3.2 Short Term Trends in the Performance on the Engineering Manufacturing Industry
93
8.3.3 Medium-Term Trends in Engineering Output
94
8.3.4 Exchange Rate Fluctuations
97
8.3.5 Overall Trends in Usage of Electricity
92
9. FUTURE PROSPECTS
100

Tables And Charts

Page
Table 1: The UK Panel Building Market 1993-2004 £m Panel Builders Selling Prices
14
Chart 2: The UK Panel Builders Market 1995-2004 £m Panel Builders Selling Prices Constant 1995 Prices
19
Chart 3: Mix of Panel Building Market by Company’s Primary Activity
21
Chart 4: UK Panel Building Market - Mix of Panel Type
34
Chart 5: Panel Builders Supplying Each Market Sector
37
Chart 6: Capital Expenditure by Service in England and Wales 1997/98
39
Table 7: Imports & Exports of Panels for Electrical Control and Electricity Distribution - 1994-1997 (£m)
42
Table 8: Key Influencers on Type of Products Incorporated Within Panels
46
Table 9: Key Influencers on Brand of Products Incorporated in Panels
48
Chart 10: Key Influencers on Brand Specification by percent of Projects they Influence
49
Table 11: Major Influences On Brand Choice
51
Table 12: Information Sources Used When Identifying Products To Be Used
53
Table 13: Person Responsible For Purchasing Of Panel Components
54
Table 14: Major Sources of Supply
56
Table 15: Factors Considered to be of Primary or Secondary Importance In Influencing Choice of Supplier
58
Table 16: Wholesalers Stocking Each Key Product Group 1998
60
Chart 17: Average Stockholding Levels In Weeks (52 Weeks PA) 1992 - 1998
61
Chart 18: Components Within the Panel Building Sector £m 1993-2004
70
Chart 19: Mix of Products Used by Panel Builders by Value £m
72
Chart 20: Mix of Enclosures Used by Panel Builders
73
Table 21: Contractors Output - New Work and RMI Non-Housing - Current Prices (£m)
90
Table 22: New Orders Obtained by Contractors 1990 - 1999 Current Prices (£m)
91
Table 23: Engineering Sales Output Changes
93
Table 24: Comparison of Engineering Sector Output by SIC Code (1995=100) 1997-2001
94
Table 25: Comparison of Engineering Sector Output by SIC Code 1997-2001 (1995=100)
96
Table 26: Exchange Rate Fluctuations 1994-1999 -DM, Dollers, and the ECU the the Pound Sterling, Spot Rates
97
Table 27: Sales by the Public Electricity Suppliers 1994-1999
98

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EXECUTIVE SUMMARY (1999)

The UK Panel Building Market as we have defined it, is substantial and estimated at some £506m in 1997.

The market was badly affected by the recession, primarily due to the decline in levels of industrial and commercial new build and RMI, as well as a reduced export market and competitive pricing strategies. Subsequently during the mid to late 1990's, the market has shown a modest recovery influenced by the following factors:-

These factors are likely to continue to influence the panel building market in the short to medium term future resulting in a forecast of limited growth. However, the market may be adversely affected at least in the short term by the strength of Sterling, which may reduce export potential, as well as having a negative impact on the UK manufacturing industry, one of the key users of panels.

The structure of the panel building market is complex, comprising in excess of 3,000 companies ranging from large panel builders to companies with small ancillary panel building operations.

These fall into a number of broad categories including companies whose primary activity is panel assembly, control systems manufacturers who design and manufacture computer based systems integrated with electrical control panels, and companies who have subsidiary panel building operations including component manufacturers, electrical contractors, electrical wholesalers, large engineering firms and building contractors.

Companies who concentrate on panel building currently account for around 33 percent of the market, however, the growing importance of computer based technology in control systems has resulted in control systems manufacturers, who can supply complete solutions, gaining share. In addition, the growth in Computer Aided Design and Modular products has enabled a growing number of electrical contractors to assemble panels for their own usage, eroding the position of dedicated panel builders.

Component manufacturers with panel assembly facilities have grown their share of the market as, by primarily using internally manufactured components, they are able to offer a number of advantages in terms of costs and timing.

Greater usage of components such as PLC's (Programmable Logic Controllers) has produced a requirement for all panel builders to develop programming skills. Combined with market developments, this has resulted in a growing number of panel builders expanding into the area of systems building, with this trend expected to continue.

Key panel builders and systems manufacturers include the Industrial Control Services Group Plc, Switchgear & Instrumentation, Blackburn Starling, Elsag Bailey, Main Systems, Elequip, Dickinson Control Systems and Eurotherm Process Automation.

A number of component manufacturers such as ABB Industrial Systems, Siemens, GEC Alsthom LV Equipment, Klockner Moeller and Groupe Schneider, Cegelec and Eaton also have substantial panel building operations. In addition, a growing number of medium and large electrical contractors assemble panels in connection with the installation projects they handle, with major companies including N G Bailey, Crown House Engineering, ABB William Steward, James Scott and Balfour Kilpatrick, as well as Lorne Stewart, Haden Young and Lee Beesley.

Control panels are assembled for a wide range of uses throughout industry, commerce and in the public sector. The market is dominated by panels for power distribution, with process control panels and motor control centres also representing major sectors. Other panel types include advanced building controls, as well as the specialist area of safety systems.

The trend away from manufacturing towards service industries in the UK has produced a reduced requirement for control panels in the industrial sector. In particular, the decline in heavy industry has produced a shift away from high voltage applications. However, there has been growth in investment by public utilities such as the water industry and more recently by the power generating and supply industry in association with the deregulation of electricity supply.

The demand for building management and control systems has shown a marked increase since 1993, stimulated by growing emphasis on environmental issues and energy efficiency, as well as the increasingly complex array of building services requiring management and maintenance. This has been stimulated more recently by an upturn in commercial construction, particularly in London and the South East, with these factors likely to produce good growth within this sector in future.

Companies operating in niche sectors such as in the oil, gas and nuclear industries where specialist skills are required, have been particularly successful during the 1990's with the reduced number of competitors enabling companies operating in these sectors to maintain higher profit margins.

There is an increasing trend towards end-user involvement on brand specification. In particular, many of the public utilities and larger companies have formulated 'approved' product lists which determine the brand of components to be used. Furthermore, the recent introduction of framework agreements is changing the specification process for panels, with a shift in responsibility towards the end user.

Panel builders are traditionally conservative and brand loyal and rely heavily in personal experience when determining the products to be used. However, the wide range of components used, with variants aimed at specific applications, means that catalogues and manufacturers brochures are often referred to in the specification process. The fiercely competitive nature of the panel building market means that price continues to be a major factor influencing brand choice.

Purchasing is most commonly made by a buyer within the panel building company, although it may also be the responsibility of the project manager or in smaller companies, the company director.

Panel Builders use a wide variety of products, primarily enclosures and components including circuit protection and switchgear, control gear, automation products and power direction products. The market for these products within the Panel Building sector, excluding products manufactured by panel builders for their own usage, is estimated at £318m in 1997.

Usage of enclosures and components is largely influenced by the development of the overall market and hence declined during the recession with modest growth since 1993. However, this growth has been at a faster rate than the panel building market influenced by the following factors:-

In addition, there are a number of other significant trends in product usage which include:-

The trend towards usage of electronic and modular products is expected to continue in the medium to long term future, with implications both for the nature of panel building operations and for product usage.

This comprehensive report represents a detailed assessment of the market, reviewing major trends, key factors influencing developments and future prospects for the sector. Analysis is both quantitative and qualitative, based on our substantial experience of the building and home improvement markets.

Text © 2000 AMA Research

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