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Steady growth predicted for the UK FM sector

Published 15th April, 2015 by Neil Nixon

Steady growth predicted for the UK FM sector

The 'Facilities management outsourcing market report - UK 2014-2018 analysis' has recently been published by AMA Research, a provider of market research and consultancy services within the construction and home improvement markets. What follows is a summary of the report's findings.

The facilities management market has exhibited good levels of growth for much of the last 20 years, influenced by organisational desires to control non-core operational efficiencies and costs, and a trend within the private sector for companies to refocus their business in order to concentrate on core competencies. In 2014, the market for outsourcing bundled and total FM services was valued at almost £19.5 billion.

The deterioration in the UK economy from mid to late 2008 had a negative impact on the development of the overall FM market. Previously, the Labour government's policy to stimulate economic growth through public sector spending had supported the FM market, though the coalition's focus on reducing the deficit removed this stimulant. This market has now returned to more positive growth and is expected to continue to show annual growth, reaching a forecast £23.2 billion by 2018.

The market is considered to be relatively mature across a wide range of sectors. However, there are also newer forms of service which are far from mature, such as energy management, compliance services, and workspace management which, if approached professionally, will broaden the industry's scope and client base.

The economic downturn has heightened price competition in the market with end-users seeking better value for money. This has had a negative impact on contract prices and has resulted in lower market values and tighter margins. In addition, the climate has led to clients seeking shorter contract lengths and more flexible terms.

The development of the facilities management market has been positively influenced by the trend to outsource an increasing array of services, with a gradual shift towards 'bundled service' and TFM contracts adding to contract values. The corporate market represents the largest end use sector, accounting for more than 50% of the market, with central and local government accounting for around a quarter. Healthcare and education had been the most rapidly growing sector in recent years and now represent 18% of the market, though the growth of this sector has now slowed sharply.

Keith Taylor, director of AMA Research, said: “The impact of public sector spending cuts is not clear at the moment. The government estates will undoubtedly shrink but our forecasts assume that outsourcing will be viewed as a means of saving costs - more so than an expenditure element to be cut. In addition, some government cuts in the education sector for example have not led to construction output reductions, as universities and academy schools, for example, appear to have been successful in drawing in private sector investment.”

The key to advancement will be maintaining a high standard of service in core activities whilst adding value by offering enhancements and differentiated services. A key area of opportunity in the public sector is likely to arise within local authorities. This sector retains potential for an increase in the level of outsourcing, which may provide an opportunity to meet cost savings required.

The overall FM market will also continue to benefit from the shift away from single service contracts towards bundled service and total facilities management packages. The trend for private and public sector clients to outsource an increasing number of services, as well as to reduce procurement costs through seeking 'one-stop-shop' solutions, is expected to continue, adding to contract values and favouring larger facilities management providers which can supply the full range of services required.

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