The facilities management market has exhibited good levels of growth for much of the last twenty 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 Facilities Management 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.
“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”, said Keith Taylor,
Director of AMA Research. “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.
Management Outsourcing Market Report – UK 2014-2018 Analysis’ report is
published by AMA Research, a leading provider of market research and
consultancy services within the construction and home improvement markets. The
report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.