Because they sell produce and buy in bulk.
Service industries are different. A gas engineer working at BG doesn't even get half what they make on an install.
When it comes to doing a service... One man band will always be cheaper because much less overheads. When it comes to goods.. the big company will be cheaper because they buy in bulk.
If you are providing a service and goods, then it's a bit more complicated... But in the gas industry the labor cost is much more expensive than the actual goods.
A one man band clearly has lower overheads in absolute terms but those overheads should be much higher in relative terms. If they aren't then someone at British Gas Services should be fired.
Looking at small companies, once you reach, say 5 engineers or so, your admin costs jump sharply. One member of admin staff is no longer sufficient. All of a sudden you need admin staff to support the existing admin staff. None of the admin staff directly increase your income but they do enable to the engineers to concentrate on generating income.
Grow a little larger and then you need managers to coordinate the admin staff. Grow larger and you are looking at dedicated admin staff, eg Human Resources.
Grow even larger and you reach a sweet point where your overheads per engineer are far lower than that of the one man band. If that wasn't the case then large firms wouldn't exist.
Your attempt to explain why Tesco is cheaper than the local corner shop is flawed. Yes, Tesco have bulk buying power (an economy of scale) but they also have the (relatively) top heavy management structure that the likes of BG have.
Economies of scale are not limited to the ability to purchase items for resale at a lower cost, they include the ability to save money across the board.
The above overlooks the fact that BG are effectively offering an insurance policy rather than simply offering a "repair" service. Insurance is a numbers game, it is effectively a form of gambling. The odds are always stacked in the favour of the "house".
Sorry, I am not having a pop at you. I haven't had a day off for a few months and according am less articulate than I would hope to be (oh, and I am having a crafty lunch time pint). Nevertheless I disagree with the basic tenets of your defence of BG.