This month BSJ offers a summary of a recent BSRIA analysis on the state of the m&e industry in the UK.
Despite the difficulties faced by many parts of manufacturing industry, m&e contracting has maintained a steady growth of around 6% per annum, with the larger companies continuing to enjoy an increased share of the market.

The total m&e output in the UK was £13.2 billion in 2000. This is split into £6.4 billion for mechanical and £6.8 billion for electrical.

It seems most large companies are still feeling the benefits of the tail end of the growth in 1999 and 2000, and smaller companies are benefiting from a robust housing market.

However, in 2002 it is predicted that all areas, other than the public sector, will show sharp declines. A particularly steep fall from industrial new build is expected and contractors could well experience some of the pain already being suffered by manufacturers.

Dominant figures
It appears the industry is still dominated by a very large number of small firms, with the result being that most companies are either very small or very large (see figure 1).

Not surprisingly, apart from the largest companies most mechanical contractors undertake primarily mechanical work and electrical contractors electrical work.

However, in 2000 some 15% of electrical contractors workload was mechanical, principally heating and ventilation – this proportion has risen from 8% in 1996/7. Over the same period the proportion of mechanical contractors workload that was electrical, mostly lighting and small power, only rose from 8% in 1996/7 to 10% in 2000.

Air conditioning is a key growth sector for the mechanical contracting industry – hardly surprising either since the supplier market has risen from £428 million in 1998 to nearly £600 million in 2000.

For electrical contractors there has been a substantial increase in the share of data and telecommunications work, although it should be pointed out they face stiff competition in this sector from specialist companies outside the scope of this survey. Overall their core business is still seen as electrical power and lighting.

In total 33% of all m&e work is in housing, 64% is in other building types and 4% is in infrastructure. However, there are significant differences in sector work between size of firm and between mechanical and electrical contractors. The smallest mechanical contractor is highly dependent on housing work – a massive 64% for one-man firms. In contrast, even for the smallest electrical firms, work in non-housing is more important than housing work.

Other buildings, such as offices, both public and private, account for around 30% of the non-housing work across all m&e contractors. In the case of large mechanical contractors the office share of non-housing stands at 37%.

Sources of work
It also appears the source of work varies by type of contractor (see figure 2). For the small plumbing/heating engineer some 60% to 70% of the work is direct from the client – this is partly due to the high levels of maintenance and refurbishment work undertaken. It is only the very large mixed m&e firms that receive the highest proportion of work from a main contractor.

Traditional contracts such as standard main contract and subcontract are more significant for larger rather than smaller businesses. At the other end of the scale small contractors get their work via labour and materials type contracts. However, this declines sharply as the company increases in size as it also does in the case of day work with no formal contract. For larger companies, management type contracts are becoming increasingly important.

Partnering
Despite the benefits and the publicity surrounding the success of partnering, it remains only 8% of total market activity and only 2% for companies with less than 3 employees. However, it does rise to 15% for companies of over 60 people and accounts for 22% of the workload of the very largest companies – those who employ more than 300.

The most common method of procurement is still fee bid and includes competitive tender, although negotiation is also important at the smaller end of the market.

The importance of Best Practice initiatives seems to be understood by most of the industry. It is clear that multi-skilling, benchmarking and standardisation are the most widely practiced by contractors (see figure 3).

Whole-life costing has much less of an impact on the majority of contractors, as only a small proportion install and maintain; indeed they may see it as a hindrance as for the most part it will not make a job more profitable. E-commerce is not common and is of negligible importance to the smaller contractor.

Who's the biggest?
In terms of the largest companies the market can be analysed as follows. The largest single company is British Gas – it has a turnover of around double the next four companies. It operates in both residential and commercial sectors. The other major operators work is principally concerned with activity in the commercial sector. Leading rivals to British Gas include ABB Building, Amec, Balfour Kilpatrick, Crown House, Drake & Scull, EIWHS, Haden Young, Lorne Stewart, MITIE, N G Bailey, Rotary Group and Southern Electric Contractor.

However, the contracting divisions of the electricity plcs provide some services, such as domestic electrical, security and insulation services, and street lighting. These are not usually offered by the m&e companies, although they are increasingly entering the remit of m&e companies through PFI work.

The top ten largest companies sales per employee has risen at an average rate of 6% per annum from £74 000 in 1993 to £110 000 in 2000. However, the increase has slowed after reaching a high point in 1996, and is much more the result of changes in employment/self employment patterns than changes in productivity.