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KEY NOTE ELECTRICAL CONTRACTING : July 2002

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This report covers: electrical contracting, wire and cable installation, voice, data and video communication networks, security, facilities management, HVAC, construction, housing, commercial buildings,

Companies covered include: ABB Holdings, AMEC, Balfour Beatty Group, Dowding and Mills, Lorne Stewart, NG Bailey & Company, Seeboard, Southern Electric Contracting, T Clarke,

EXECUTIVE SUMMARY

The electrical contracting market in the UK continues to experience growth. In 2001, its value increased by an estimated 3.2 percent, to £6.5bn, which was slightly lower than the average annual growth rate achieved between 1997 and 2001. Nevertheless, it still represents a healthy increase in new business for contractors.

Demand for electrical contracting is driven by the level of activity in areas of the construction industry; in particular, housing, industrial and commercial building, the public sector (government and local authority), infrastructure (including transport and power), and repairs, maintenance and refurbishment. Of these, the repair, maintenance and refurbishment sector currently provides the most opportunities for contractors.

Growth in demand is heavily dependent on the health of the construction industry, which, in turn, is reliant on economic growth for its own increase in value. The UK economy has been growing for some time, with increases in consumer spending and growth in the housing market having a positive impact on new construction. However, these positive factors have been counterbalanced by declines in the manufacturing sector, which have resulted in reduced demand for new industrial premises. Looking forward, recent forecasts point to a reduced economy, lowering demand for new construction and dampening the construction market in general. This would have an adverse effect on opportunities for electrical contractors.

New legislation calling for electrical safety to become part of the UK building regulations will also have a significant impact on electrical contractors, who will be forced to become registered with one of the national bodies that represent the market, and demonstrate high levels of competence. These changes will increase the need for investment in training and could serve to raise costs for many firms, forcing some smaller or one-man operations out of business.

Nevertheless, the outlook for the industry remains positive. Commitment to nationally important projects, e.g. the overhaul of the UK railway network, the development of prestigious projects such as Terminal 5 at Heathrow Airport, and the redevelopment of city-centre areas such as Birmingham's Bull Ring development, will continue to provide opportunities for contractors. The ongoing trend towards refurbishment and renovation of domestic housing, commercial premises and smaller industrial properties will also provide work for small, local firms. Consequently, Key Note forecasts continued growth to 2006.

In addition to UK growth, many larger contractors are looking overseas for opportunites to increase their revenue. With the harmonisation of standards and currencies, particularly in Europe, there appears to be a wealth of opportunity outside the UK.

TABLE OF CONTENTS

Executive Summary	1
1. Market Definition	2
INTRODUCTION	2
MARKET TRENDS	2
Economic Influences on Demand	2
Table 1: Gross Domestic Product at Current and Constant 1997 Prices (£m), 1997-2001	3
Refurbishment and Maintenance	3
MARKET POSITION	4
The UK	4
Overseas	4
2. Market Size	6
INTRODUCTION	6
THE TOTAL MARKET	6
Table 2: Electrical Contracting Work by Value at Current Prices (£bn), 1997-2001	7
CONSTRUCTION OUTPUT	7
New Housing Work	7
Table 3: New Housing Construction Output by Value at Current Prices (£m), 1997-2001	8
Repair and Maintenance of Housing Stock	8
Table 4: Repair and Maintenance of Housing Stock by Value at Current Prices (£m), 1997-2001	9
Industrial and Commercial Buildings	9
Table 5: Work in Industrial and Commercial Buildings by Value at Current Prices (£m), 1997-2001	10
Infrastructure Investment	10
Table 6: Investment in UK Infrastructure by Value at Current Prices (£m), 1997-2001	11
Public Sector Investment	11
Table 7: Public Sector Investment in New Construction by Value at Current Prices (£m), 1997-2001	11
Total Work	12
Table 8: UK Construction Industry Output by Value at Current Prices (£m), 1995-2001	12
Orders Obtained by Building Contractors	12
Table 9: Orders Obtained by Building Contractors for New Work by Sector by Value at Current Prices (£m), 1997-2001	13
3. Industry Background	14
RECENT HISTORY	14
INDUSTRY CONCENTRATION	15
Table 10: Number of VAT-Based Enterprises Involved in the Installation of Electrical Wiring and Fittings by Turnover Sizeband, 2001	16
EMPLOYMENT	16
Table 11: Number Employed by Electrical Contractors, 1997-2001	16
REGIONAL VARIATIONS IN THE MARKETPLACE	17
Table 12: New Construction Orders Obtained by Contractors in Great Britain by Region at Current Prices (£m), 2000	18
DISTRIBUTION OF ELECTRICAL COMPONENTS	18
HOW ROBUST IS THE MARKET?	19
LEGISLATION	19
KEY TRADE ASSOCIATIONS	20
Electrical Contractors Association	20
National Inspection Council for Electrical Installation Contracting	20
SELECT	20
4. Competitor Analysis	21
THE MARKETPLACE	21
MARKET LEADERS	21
ABB Holdings Ltd	21
AMEC PLC	22
Balfour Beatty Group Ltd	23
Dowding and Mills PLC	24
Lorne Stewart PLC	25
NG Bailey & Company Ltd	26
Seeboard PLC	27
Southern Electric Contracting Ltd	27
T Clarke PLC	28
OTHER COMPANIES	29
Table 13: Other Leading UK Electrical Contractors by Turnover (£m), 2000/2001	29
OUTSIDE SUPPLIERS	30
Equipment Manufacturers	30
Electrical Wholesalers	31
ADVERTISING AND PROMOTION	32
Exhibitions	32
5. Strengths, Weaknesses, Opportunities and Threats	33
STRENGTHS	33
WEAKNESSES	33
OPPORTUNITIES	34
THREATS	34
6. Buying Behaviour	35
INTRODUCTION	35
MAIN AREAS OF DEMAND	36
Table 14: Expenditure on New Work and Repairs and Maintenance by Sector ( percent), 2001	36
New Housing	37
Infrastructure	37
Industrial	38
Commercial	38
Repairs and Maintenance	38
7. Current Issues	39
CLIMATE CHANGE LEVY	39
CONSUMER PROTECTION	39
ELECTRICAL SAFETY	39
ELECTRICAL CONTRACTOR COMPETENCE	39
ENERGY EFFICIENCY	40
THE EUROPEAN MARKET FOR CONTRACTING SERVICES	40
REWIRING OF HOUSING AND BUILDINGS	40
TAXATION (CONSTRUCTION INDUSTRY SCHEME) AND VAT	40
TRAINING AND APPRENTICESHIPS	41
8. The Global Market	42
BREAKING NATIONAL BOUNDARIES	42
MARKET VALUE	42
GLOBAL OPPORTUNITIES	42
9. Forecasts	43
INTRODUCTION	43
FUTURE TRENDS	43
Demand for Contractors	43
Contract Developments	44
Europeanisation/ Globalisation	44
Product Development	45
Technological Change	45
Communications	45
Security	45
FORECASTS 2002 TO 2006	45
Table 15: Forecast Electrical Contracting Work by Value at Constant 2002 Prices (£bn), 2002-2006	46
10. Company Profiles	47
ABB Holdings Ltd	48
AMEC PLC	50
Balfour Beatty Group Ltd	52
Dowding and Mills PLC	54
Lorne Stewart PLC	56
NG Bailey & Company Ltd	58
Seeboard PLC	60
T Clarke PLC	62
11. Further Sources	64
Associations	64
Publications	66
Directories	67
General Sources	67
Bonnier Information Sources	68
Government Publications	69
Other Sources	70
Key Note Research	71
The Key Note Range of Reports	72

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