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Rising costs are driving down profit margins

Published 3rd May, 2011 by Neil Nixon

Rising costs are driving down profit margins

One in three companies in the UK cleaning services industry are making a loss according to new research from market analysts Plimsoll. Many in the market are finding it difficult to pass on the pain of cost inflation to their customers as competitive pressure is restricting their pricing power.

Lead analyst and author of the new Plimsoll Analysis has explained the growing problem in the market: “Whether its fuel, materials or wage demands every company in the UK cleaning services industry is being squeezed by ever increasing costs. 62% of companies have seen their gross margin fall in the latest year. Unfortunately, many are reluctant to pass on price rises for fear of losing customers to cost savvy competitors. However, falling profit margins across the industry is the first warning sign that this strategy has become unsustainable.

Over the past two years the average profit margin in the UK cleaning services industry has fallen to 4%. More worryingly, 307 companies are losing money with 134 of these doing so for the 2nd year running.

These companies face a tough decision - protect their market share and continue to lose money or adjust their prices to reflect their increased costs. Without refocusing on the bottom line, many of these companies will simply run out of cash.”

The author goes on to explain that it’s not all bad news though and that many companies are getting it right: “362 companies have managed to actually increase their profit margins over the same period. In all 693 companies have managed to stay in the black despite rising costs. Clearly, operating profitably in the UK cleaning services industry is difficult but not, as yet, impossible.”

The new Plimsoll Analysis – Cleaning Services will tell you instantly which companies are prospering in the post-recession market place, those set to be bought out and those heading for trouble - across the whole of the market and in the individual regions. It gives an instant performance rating on 1000 companies and highlights those ripe for acquisition. Each company is assessed using the Plimsoll model - a graphical and written analysis that lays bare the facts and gives you instant opinion.

Readers of Cleaning and Maintenance are entitled to a £50 discount of this new edition of the Plimsoll Industry Analysis - Cleaning Services. Call 01642 626400 for further details and quote reference PR/ SV20.

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