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UK Bundled FM
Outsourcing Market within Central & Local Government at Current
Prices 2005 – 2010
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The Facilities
Management market has shown good growth since the early 1990’s,
influenced by the desire to control operational efficiencies and
costs across a wide variety of sectors, as well as more recently a
trend within the private sector for companies to refocus their
business to concentrate on core competencies. Further growth since
the turn of the millennium has resulted from the buoyant state of
the economy, as well as public sector developments funded through
the Private Finance Initiative (PFI)/ Public Private Partnerships
(PPP). This has contributed to an overall market value for
outsourced ‘bundled’ services and TFM of £14bn in 2007.
This report is
specifically focussed upon Central and Local Government,
representing the largest end use sector for outsourced FM services.
Accounting for an estimated 44% of the overall market, the market
for outsourced ‘bundled’ services within Central and Local
Government is valued at around £6.4bn in 2008, with the development
of this market between 2005 and 2010 illustrated in the chart left.
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The Central
and Local Government outsourcing market has been increasing in value by
around 3-4% since the turn of the millennium, influenced to a significant
degree by the focus on improving efficiency within government
departments. Central Government represents the larger sub-sector, with
outsourcing of ‘bundled’ FM services valued at around £4.5bn in 2008.
However, the sector is generally considered to be mature, with growth
rates of 2-3% in recent years largely dependent upon new property
developments. In contrast, FM outsourcing within Local Government is less
well established, enabling growth rates of 4-5% since the turn of the
millennium to a value of around £1.9bn in 2008.
The penetration of FM
outsourcing within the Central Government sector generally is estimated
at around 60%. Sectors such as Central Government offices and the
Ministry of Defence are considered to offer limited prospects for
additional increases in penetration, although the devolved governments
and prison sector are likely to offer some potential over the next few
years. In contrast the local government sector is less mature with
outsourcing accounting for around 30% of overall FM provision by value.
However, outsourcing generally is increasing across the sector and
combined with growth in the number of services being outsourced under
‘bundled’ contracts, this has contributed to good levels of growth in the
Local Government arena.
At the time of writing this
report there has been a marked deterioration in both the UK and global
economic outlook. The UK economy is currently forecast to remain weak
over the short to medium term, with the potential for a slow return to
growth from 2010. While the market for FM outsourcing within Central and
Local Government is less affected by the economic climate than other end
use sectors, the severity of the current economic downturn is likely to
have some impact. In order to lessen the impact of the economic downturn,
the government has announced its intention to bring forward some planned
spending commitments, potentially providing additional opportunities for
FM providers in the sector.
The FM market is generally
mature within central government departments, with further potential
necessitating organic growth. However, there remain a number of sectors
which are likely to provide a boost to the market over the next few
years, including expansion and refurbishment of the prison estate, the
modernisation of the courts service, batched police schemes and the
development of additional immigration detention places.
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