SUMMARY OF REPORT CONTENTS

In our last report in 2004 the UK panel building market was estimated to be worth some £557m in 2003 at current selling prices and we estimate that growth overall since that time has been very modest, with the 2005 market worth £568m.  

However from our recent surveys there are a number of panel building companies who report very good growth over the last 2 years and are optimistic that this will continue for the particular sectors they supply, such as the oil and gas industry. In addition they consider there are opportunities in the nuclear power sector brought about by recent policy changes with regard to de-commissioning and new build.

However, the industry continues to be adversely affected by depressed demand in the manufacturing sector and the panel building market could have gone into a more pronounced decline were it not for high levels of spending in construction and infrastructure projects, many of these areas publicly funded.

Other factors impacting on the market are:-

• High levels of consumer spending encouraging retail business and shopping centres and associated power, heating, lighting applications.

• Underlying growth in the demand for electricity and ‘clean’ secure power.

• Miniaturisation of electronic or electro-mechanical systems and the increasing use of intelligent systems leading to a reduction in panel size and assembly times with the result that panels traditionally requiring 10 bays have typically been reduced to 2 bays with a corresponding reduction in panel contract and market values.

• On-going trends to distributed power, creating demand for additional, but smaller panels.

• Increased demand for back-up power supplies with UPS protection to support critical needs in a number of sectors and IT systems.

• Keen price competition tending to erode profit margins and market value, as panel builders compete for business.

• An increasing trend for medium and large panel building companies to purchase components directly from the manufacturers rather than the electrical wholesaler thus obtaining volume discounts.

• A selection of specialist niche sectors displaying more positive trends include: Growth in detection and protection systems, Growth in e-trade in general, creating a demand for courier operations and a market for logistics control, sorting and handling systems.

It is forecast that the net effect of these factors together with some early signs of a levelling out or even recovery in manufacturing, will cumulatively contribute to an improvement of the panel market perhaps leading to growth levels of 3-4% per annum. It should be emphasised that certain sectors are demonstrating more positive characteristics than others and for individual panel builders, much will depend on which sector they serve.

The structure of the panel building market is fragmented and it is estimated that there are about 550-600 companies engaged in panel building, the majority of which are likely to have an annual sales turnover of under £3 million and range from large multi-national panel builders to companies with small ancillary panel building operations.

Panel builders may be classified according to a number of broad categories including companies whose primary activity is panel assembly, companies who make control systems, and companies who have subsidiary panel building operations including component manufacturers, electrical contractors, electrical wholesalers, and large specialist engineering firms and building contractors.

In general terms, there is also a growing demand for fully integrated panel solutions.  This may tend to provide a competitive advantage for the larger panel building companies.  Often these larger companies are component manufacturers who have grown their share of the panel building market.  By using internally manufactured components, they are able to offer a number of advantages in terms of costs and timing.

There is a general trend towards more intelligent software controlled panels, which provide additional functionality, improved reliability and smaller dimensioned components and enclosures than traditional panels.  This tendency will continue to threaten small companies where they lack the necessary skills to provide this technology.

Schneider Electric and Siemens are two of the most significant panel builders in the UK, and both also offer a wide rang of other electrical products and services. Other component manufacturers such as ABB, Eaton, Tyco, Klockner Möller, Mitsubishi, and Rockwell Automation (Allen-Bradley), also have substantial panel building operations. 

Key panel builders and systems manufacturers include: AF Switchgear, ICS Triplex, Anord, Power Panels, Blackburn Starling, Danfoss, General Panel Systems, ICW, Main Systems, Switchgear & Instrumentation, Crompton, Lloyd Morris, Hima-Sella and Saftronics.

In addition, electrical contractors assemble panels in connection with installation projects, major companies including NG Bailey, Crown House Engineering, James Scott and Balfour Kilpatrick, as well as Lorne Stewart, Haden Young and Lee Beesley.

The panels under our definition are assembled for a wide range of applications throughout general industry (manufacturing), construction and commercial buildings, transportation and the utilities.  The market is lead 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 protection, safety/emergency shut down systems for process plants to protect personnel, equipment and the environment.

There continues to be general growth in electricity consumption across all sectors.  This is a positive market factor in the assessment of the panel building market, with implications for power generation and power distribution to replace older equipment or add capacity.  In addition, there is increasing demand for clean, uninterruptible power and CHP cooling, heating and power solutions, and systems in support of power from renewable energy sources.  These issues will tend to require additional control panels, adding value to this market.

The recent decision by the government to reintroduce nuclear power is recognition that there is a large gap both in the targets to reduce CO2 emissions and in the supply and security of energy. In addition to the pressures of climate change, there is growing concern that the UK will become dependent on foreign imports of natural gas, importing as much as 90% from the Middle East, Africa and Russia.

Britain’s twelve nuclear power stations currently provide 22% of the country’s electricity, however a number of those are expected to close by 2020 and construction of replacement power plants could start within the next 10 years, eventually supplying up to 40% of the UK’s energy supply. The combination of de-commissioning existing nuclear plants and replacing them with new ones should have a positive impact on the panel building industry.

The recent government review of energy recommends a mix of 3 components: nuclear power, renewable resources, such as wind and solar power, and a more efficient use of energy both from industry and individuals. As a result of this recent decision, renewable and efficient energy are high on the government’s agenda. Again in the long term this should provide opportunities for the panel building industry.

The demand for building management and control systems (security, fire protection, environmental control, IT infrastructure, etc.) is growing, stimulated by environmental issues, energy efficiency, and increased efficiencies through reduced manning levels.

Manufacturing industry has been in recession for many years suppressing growth in the panel building industry’s largest market.  In particular, the long-term decline in heavy industry has produced a shift away from high voltage applications.  However there is some evidence of a slowdown in this decline, and even some growth and, if the latter is realised, this would have a significant positive impact on panel building.

There has been good investment growth in infrastructure, including the water, power generation and railway industries.  There are indications from panel builders that investment by the water industry under the 2005 five year Asset Management Plan (AMP4) is beginning to impact positively on the industry. 

The oil and gas industry both in the UK and overseas is providing significant opportunities for the panel building industry though in general it is likely to be the medium and large companies that win these contracts.

In addition and in the longer term, there will be considerable activity in airport expansion.  Also the rail sector is set for ongoing capital investment, with improvements to the London underground already underway, the possible Cross-Rail project, the West Coast improvement and other improvements relating to urban travel and the impact of the Olympics.

The construction industry generally is also expected to provide opportunities, relating to the Olympics, but also relating to other major building programmes such as in the health and education sectors, where the government is committed to large scale investment and improvement over the next 10-15 years.

In addition there is likely to be far greater investment in residential accommodation, particularly in high density urban environments. These building programmes will also have implications for infrastructure and utility investment in the relevant geographical areas.

Increasing complexity and in-built intelligence within new component parts for panels means that the designer is having more influence in the selection decisions.  Price continues to be a major factor influencing brand choice, although familiarity with the product and selection on the basis of low risk are becoming more influential factors.

The choice of a source of supply is mainly influenced by product availability and price, with certain products only available through ‘appointed distributors’. There are indications from our recent survey of the industry, that manufacturers are now becoming a more commonly used source of supply with medium to large companies at the expense of Electrical wholesalers and distributors. Many of the larger panel building companies manufacture their own components and would naturally use these in their products.

In addition, customers are becoming more influential in component selection, particularly in the regulated industries.  Panel builders use a wide variety of components, including the categories of enclosures, circuit protection and switchgear, control gear, automation products and power distribution products.

The use of components has been largely influenced by the development of the overall panel market, particularly the following factors:

• With increasing miniaturisation and embedded intelligence within PC base systems and the increased use of HMI devices, the overall parts count in panels will diminish, although the value of these new components will increase.

• Shift from hard-wired and electro-mechanical technology to solid state software controller electronic devices. • Reduction in component size and heat dissipation, enabling smaller enclosures.

• Reductions in component builders’ margins due to highly competitive market conditions impacting on panel builders’ margins.

• Declining usage of more expensive high-voltage products.

• Keen price competition amongst component and enclosure manufacturers.

• Continuing trend to the usage of rail mounted products and associated adapters/clip-on devices, etc.