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£200m Cash Injection for FM Market in 2016
A new report on the UK facilities management market from MTW Research has found that profitability is set to rise by £200 million in 2016, sustaining optimism for the market despite a slight slowdown in growth.
Based on data from 70% of the market, the research found that whilst there are some short term challenges for the outsourcing market.
Long term fundamentals remain largely positive for sustained value and volume growth in 2016 and 2017, with contract wins gathering pace through to 2020.
The recent introduction of the National Living Wage will cost the FM market some £250 million in the next few years according to MTW, affecting more than 400,000 people. MTW found that the UK facilities management outsourcing market is responsible for more than 1.4 million jobs in 2016 with SME FM providers and regionally based companies feeling the pinch of the new Living Wage more than London based and larger TFM providers.
The report discusses the trend of 'in-sourcing' in some detail with the research findings indicating that there is some anecdotal evidence of 'unbundling' occurring in some sectors of the FM market. MTW forecast this trend to continue in the next few years due to medium term factors, though growth in differentiated FM should continue to negate this threat in the longer term.
"The FM market is headed inexorably toward a two-tier market with some providers drawn into a 'race to the bottom' as 'in-sourcing' trends sustain pricing pressure," notes MTW's director Mark Waddy: "More successful FM providers are extending market gains through differentiation such as strategic FM, use of IoT technology, enhanced communication, collaboration and greater understanding of the client organisation."
The FM market will generate an average of £300 million of sales per day in 2016, according to MTW. Some £40 million a day will be spent on FM services in the health sector alone by 2017, with growing pressure on budgets boosting demand for efficiency savings.
The research found that this is sustaining demand for technology which offers enhanced productivity such as IoT connected devices, automated monitoring & reporting, robotic cleaning equipment and remote servicing. These technologies are enabling the FM market to become leaner and more effective whilst also prompting additional capital investment by the larger providers, underpinning optimism for equipment suppliers to the FM market in 2016.
The report identifies several growth opportunities for FM providers, with the recent terrorist attacks in Brussels re-focusing attention on the need for enhanced security measures within public and private sectors. A range of threats are also discussed with the EU referendum dampening short term growth in H1 2016 as a number of foreign owned companies are adopting a 'wait and see' approach before committing to longer term service contracts and remaining in the UK.
The report provides a comprehensive review of the UK FM market in 2016, and found that some 45% of FM contractors experienced growth in the last 12 months with 3 years of financials for 100 key FM contractors provided.
MTW's analysis of end use sectors also discovered that whilst TFM is gaining share in public and commodity sectors, the need for greater flexibility and for clients to 'switch off' services when necessary represents a growing challenge for the FM Market in 2016 and beyond.
21st April 2016