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Press Release: UK Facilities Management Market Development Report

Released: December 2010

After researching the UK facilities management market development and taking into account various other factors the following conclusions can be drawn from MBD's report:

Market Review 2006-2010:

The UK potential market for facilities management, includes contracted out services (single service and bundled services contracts), TFM contracts as well as ancillary services carried-out by in-house staff. In 2010, the UK potential market for facilities management increased by an estimated 1% to £118.8 billion. This follows moderate growth of 2% and 1% in 2008 and 2009 respectively. This is in contrast to stronger growth of between 4% and 5% recorded in the previous two years. Overall, the value of the potential market for facilities management is believed to have increased by a cumulative 7% between 2006 and 2010. The slowdown in growth between 2008 and 2010, is largely a reflection of the adverse economic conditions, resulting in companies focussing on reining in spending, and in turn negatively affecting expenditure on outsourced services. MBD believe pressure to control costs also led to reduced FM contract values, with cut backs in non-essential services such as landscaping, refit and refurbishment. Increased price competition amongst facilities management providers has also hindered stronger value growth during the latter part of the review period. Moreover, the PFI market, which has represented a strong growth sector for facilities management companies in recent years, was also negatively affected by the reluctance by banks to lend money as a result of the credit crunch.

However a number of facilities management companies have also benefited from the economic downturn, as an increasing number of companies are opting for outsourced services as they tend to be perceived to be a more cost effective option. Furthermore, the adverse economic climate has also helped some facilities management providers to build closer relationships with their clients, as companies are more inclined to stick with their existing supplier, who already knows their organisation well and can help them reduce costs, rather than putting out new tenders. In the public sector, some facilities management providers are also likely to benefit from the government’s austerity measures. Indeed, there are signs that more local authorities are opting for multiple services outsourced contracts, in a bid to reduce the number of suppliers and rein in costs. However, at the same time, profit margins in public sector contracts are also being increasingly squeezed, restricting a stronger value development of the market.

Market Forecast 2011-2015:

The UK potential market for facilities management is anticipated to increase throughout the five year forecast period up to 2015, with annual growth levels expected to fluctuate between 2% and 4% in real terms. In 2015, the value of the potential market is forecast to reach £135.4 billion (at 2010 prices), equivalent to overall growth of 12% in real terms compared with 2010. In 2011, the market development is expected to remain somewhat restricted, due to the continued fragility of the economic recovery. The continued trend towards outsourcing is expected to ensure future growth opportunities for facilities management companies, with bundled services and integrated solutions, in particular showing the strongest growth potential. However, increased price competition, and with clients adopting a “more for less” attitude, this is likely to restrict a stronger value development. In the public sector, spending cuts and the scrapping of programmes such as BSF, is also expected to exert a downward pressure on the facilities management market. However, the government spending cuts are also expected to provide some opportunities for facilities management providers. As such, local authorities are likely to increasingly opt for bundled services outsourcing contracts, in a bid to reduce the number of suppliers and cut costs. This will provide further growth opportunities for facilities management providers, in particular larger companies, which have the internal economies of scale and capabilities to offer cost effective solutions. However, profit margins in the public sector are also expected to be squeezed strongly over the coming years.

Note to Editors:

MBD specialises in business to business market research. The range of reports and industries in which we operate in is constantly expanding (our portfolio comprises of more that 140 titles). All our reports are written by in-house market consultants.

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