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Table of Contents

Executive Summary

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TABLE OF CONTENTS

1. INTRODUCTION 6

2. SUMMARY 7

2.1 THE MARKET 7

2.2 COMPANIES 8

2.3 APPLICATIONS 9

2.4 BUYING PROCESS 10

2.5 PRODUCT TRENDS 11

3. ECONOMIC ENVIRONMENT 14

3.1 INTRODUCTION 14

3.2 GROWTH 14

3.3 INTEREST RATES 15

3.4 FIXED INVESTMENT 15

3.5 CONSUMER CONFIDENCE 15

3.6 CONCLUSION 15

4. THE UK PANEL BUILDING MARKET 17

4.1 DEFINITION 17

4.2 MARKET SIZE 17

4.3 MARKET STRUCTURE 22

4.4 COMPANIES 27

4.5 STRENGTHS, WEAKNESSES, OPPORTUNITIES & THREATS 36

5. PANEL BUILDERS OUTPUT 41

5.1 MIX OF SALES 41

5.2 PANEL BUILDERS CUSTOMERS 45

5.3 IMPORTS & EXPORTS 50

6. BUYING AND SPECIFICATION PROCESS 52

6.1 INTRODUCTION 52

6.2 SPECIFICATION PROCESS 54

6.3 RESPONSIBILITY FOR PURCHASE 64

6.4 SOURCE OF SUPPLY 65

6.5 GENERAL ELECTRICAL WHOLESALERS 70

6.6 SPECIALIST WHOLESALERS AND DISTRIBUTORS 74

6.7 ELECTRONIC COMPONENT DISTRIBUTORS 77

6.8 DIRECT DISTRIBUTION 78

7. PRODUCT USAGE 79

7.1 OVERALL PRODUCT USAGE 79

7.2 ENCLOSURES 84

7.3 CIRCUIT PROTECTION AND SWITCHGEAR 86

7.4 AUTOMATION PRODUCTS 90

7.5 CONTROL GEAR 94

7.6 POWER DIRECTION PRODUCTS 98

7.7 OTHER PRODUCTS 100

7.8 SUPPLIERS 101

8. KEY MARKET INFLUENCES 107

8.1 CONTRACTORS OUTPUT 107

8.2 ENGINEERING OUTPUT 112

8.3 TERMINAL PASSENGERS AT UK AIRPORTS 115

9. FUTURE PROSPECTS 117

9.1 THE UK PANEL BUILDING MARKET - MACRO-ECONOMIC INFLUENCES 117

9.2 TRENDS WITHIN THE UK PANEL BUILDING MARKET 118

9.3 PRODUCT USAGE 119

9.4 BUYING AND SPECIFICATION PROCESS 120

TABLES AND CHARTS

TABLE 1: THE UK PANEL BUILDING MARKET 1990-2002 £M PANEL BUILDERS SELLING PRICES

CHART 2: THE UK PANEL BUILDERS MARKET 1990-2002 £M PANEL BUILDERS SELLING PRICES CONSTANT 1990 PRICES

CHART 3: MIX OF PANEL BUILDING MARKET BY COMPANY'S PRIMARY ACTIVITY

CHART 4: UK PANEL BUILDING MARKET - MIX OF PANEL TYPE

CHART 5: PANEL BUILDERS SUPPLYING EACH MARKET SECTOR

TABLE 6: IMPORTS & EXPORTS OF PANELS FOR ELECTRICAL CONTROL AND ELECTRICITY DISTRIBUTION - 1994-1997 (£M)

TABLE 7: KEY INFLUENCERS ON TYPE OF PRODUCTS INCORPORATED WITHIN PANELS

TABLE 8: KEY INFLUENCERS ON BRAND OF PRODUCTS INCORPORATED IN PANELS

CHART 9: KEY INFLUENCERS ON BRAND SPECIFICATION BY percent OF PROJECTS THEY INFLUENCE

TABLE 10: MAJOR INFLUENCES ON BRAND CHOICE

TABLE 11: INFORMATION SOURCES USED WHEN IDENTIFYING PRODUCTS TO BE USED

TABLE 12: PERSON RESPONSIBLE FOR PURCHASING OF PANEL COMPONENTS

TABLE 13: MAJOR SOURCES OF SUPPLY

TABLE 14: FACTORS CONSIDERED TO BE OF PRIMARY OR SECONDARY IMPORTANCE IN INFLUENCING CHOICE OF SUPPLIER

CHART 15: AVERAGE WHOLESALERS STOCKHOLDING LEVELS IN WEEKS (52 WEEKS PA)

CHART 16: USAGE OF ENCLOSURES & COMPONENTS WITHIN THE PANEL BUILDING SECTOR £M

CHART 17: MIX OF PRODUCTS USED BY PANEL BUILDERS BY VALUE £M

CHART 18: MIX OF ENCLOSURES USED BY PANEL BUILDERS

TABLE 19: CONTRACTORS OUTPUT - NEW WORK AND RMI NON-HOUSING - CURRENT PRICES (£M)

TABLE 20: CONTRACTORS OUTPUT - NEW WORK INDUSTRIAL SECTOR - CURRENT PRICES (£M)

TABLE 21: CONTRACTORS OUTPUT - NEW WORK COMMERCIAL SECTOR - CURRENT PRICES (£M)

TABLE 22: NEW ORDERS OBTAINED BY CONTRACTORS 1990-1997 - CURRENT PRICES (£M)

TABLE 23: ENGINEERING OUTPUT BY SIC CODE £BN

TABLE 24: ENGINEERING OUTPUT BY SIC CODE £BN

CHART 25: NUMBER OF PASSENGERS AT UK AIRPORTS 1986-1996

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EXECUTIVE SUMMARY

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:-

• Improved levels of industrial and commercial investment.
• Increasing concerns over environmental, energy conservation and security issues resulting in rapid growth in building and energy management systems.
• The trend away from manufacturing towards service based industries in the UK.
• Increased automation in manufacturing and warehousing.
• Investment by the water companies and the power generation and distribution industry.
• Exports to Third World and South East Asian countries.
• Fierce price competition as panel builders compete for business, particularly in less specialist sectors.

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:-

• Increased usage of more expensive electronic products, with particular growth in PLC's and intelligent interface devices.
• Reductions in panel builders margins, with components now accounting for a larger proportion of panel costs.
• Growth in added-value, time saving and modular products.
• The trend towards buying in, rather than manufacturing enclosures internally.
• Increased use of more expensive well known brands driven by modularity, customer demands and ISO 9000.
• Declining usage of more expensive high-voltage products.
• Fierce price competition amongst component manufacturers.

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

• Rapid growth in usage of PLC's and other electronic components at the expense of traditional electrical products. This has produced an additional market for associated products including operator interface stations, 'intelligent' interface devices and surge suppression products.
• Usage of DIN rail mounted products is now slowing as this sector approaches its mature phase, with share now being eroded by the trend towards clip-on busbar systems.
• A trend towards product miniaturisation which affects the size of enclosures used and the requirement for cabling.
• Widespread usage of CAD (Computer Aided Design) and modular products has reduced the barriers to market entry.

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 © 1998 AMA Research

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