SUMMARY OF REPORT CONTENTS

         UK Bundled FM Outsourcing Market at Current Prices

The Facilities Management market has exhibited good levels of growth for much of the last twenty years, influenced by company/organisational desires to control operational efficiencies and costs, as well as more recently a trend within the private sector for companies to refocus their business in order to concentrate on core competencies.

The deterioration in the UK economy from mid to late 2008 has had a negative impact on the development of the FM market, with reduced opportunities in the corporate sector moderated by the influence of public sector contracts arising from long-term projects coming ‘on stream’ and government attempts to stimulate the economy through increased public sector expenditure.  These combined factors have resulted in marginal deterioration in the FM market since mid 2008, with the market for outsourced ‘bundled’ services and TFM valued at almost £16.9bn in 2010. The market is forecast to stabilise and grow from 2012 and reach £17.9bn by 2015.

Another factor influencing the development of the FM market in recent years has been the trend to outsource an increasing array of services, with a gradual shift towards ‘bundled service’ and TFM contracts adding to contract values.

The market is now considered to be relatively mature across a wide range of sectors such as corporate offices, retail and most Central Government Departments.  As a result there is relatively limited potential for growth through increased penetration making the FM market increasingly subject to the performance of the economy. The recent economic downturn has heightened price competition in the market, with end users frequently adopting a ‘more for less’ attitude at the time of tendering for contracts.  This has had a negative impact on contract prices and has resulted in lower margins for FM providers.

The Corporate market represents the largest end use sector, accounting for around 56% of the market, with the Central and Local Government accounting for 25%.  Healthcare & Education has been the most rapidly growing sector in recent years to account for a share of around 19%. FM outsourcing has increased in both the public and private sectors over the last decade to account for around 64% of overall non-core service provision.  Despite this there remain a number of niche sectors where outsourcing is less well established and potential for growth remains, these include Local Authorities, Schools, Leisure, Manufacturing and Social Housing.

 The last few years have seen significant consolidation in the supply structure of the FM market, with an unprecedented number of mergers, acquisitions, business failures and market withdrawals.  Initially prompted by market maturity and the trend for large FM companies to make strategic acquisitions in order to increase their competitive position, the more difficult trading conditions have also had an impact

Despite only modest growth forecasts over the next few years, the market will continue to benefit from the continuing shift away from single service contracts towards bundled service and TFM 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 FM providers who can supply the full range of services required.  Furthermore, the trend to outsource strategic as well as non-core services is likely to result in increasing crossover between FM and BPO potentially encouraging mergers and acquisitions between the two sectors.

The government is committed to reducing the level of public sector debt over the next five years, resulting in reduced levels of expenditure across virtually all government departments.  Bearing in mind the influence of public sector applications on the FM market, this will have a significant dampening effect on growth prospects over the medium term.