FM Market Set for £2 Billion Boost in 2019 - New Report from MTW Research
A new report on the UK Facilities Management Outsourcing market from MTW Research suggests that outsourcing will grow by £2 billion in 2019, with the FM market forecast to rise by more than £10 billion by 2022.
Based on data from 80% of the FM market, the report suggests .....
..... that whilst FM trends will continue to reflect sustained pricing pressure in a challenging market in 2019, growth opportunities for FM companies and their suppliers remain significant. For example, pressure on clients’ productivity in 2019 is highlighted as a key opportunity for FM providers to grow margins.
MTW’s director Mark Waddy commented, “It’s likely that ‘third level differentiation’ will really gain traction in the FM market in 2019. The collapse of Carillion and others have focused the FM market toward more sustainable FM economics, with a fundamental shift to outcome based contracts and other critical success factors transforming the UK outsourcing market.” The report discusses 20 emerging and critical success factors for the FM market, with trends including contract selectivity, convergence and the equitable accounting of risk divestment identified as key areas to enhance margins in the FM market.
Based on sales data from companies worth £90 billion, MTW found that net worth of the FM market will rise by 9% by 2022, reflecting a slowdown from the 16% growth in previous years. Despite this slowdown, the report identifies an additional £2.6 billion of sales for ‘bundled outsourcing’, highlighting that whilst growth will become more elusive in the FM market, healthy opportunities for revenue and profit growth will exist through more sophisticated targeting and marketing.
The 10th edition report includes end use sector shares, identifying the best and worst performing FM markets. In previous years the security and catering sectors offered growth opportunities, though MTW also point to the forthcoming Public Spending Review in 2019 as potentially offering new sales stimulus as austerity comes to an end. Security services are set to boost the FM market by £1.5 billion, with property maintenance and office support services rising by £5 billion combined. The end of the PFI era will also have a dramatic effect on the market as this pipeline is replaced by other mechanisms.
The impact of Brexit on the FM market is provided, with MTW identifying key growth trends set to offset the inevitable Brexit effect. Disruptive technology, communications, outcome based success measurement, data collection and content analysis amongst others are assessed, with recent mergers and acquisitions also pointing to what could be a seismic shift in how FM outsourcing is perceived from within and outside the industry in the next few years.
The report profiles the top 100 FM outsourcing companies, finding that average profitability remained depressed in 2018, though expectations are for a steady strengthening in the longer term with net worth rising 25% over the review period. Short term debt is forecast to rise in the outsourcing market, with inevitable consequences for suppliers to the FM companies as the market remains competitive, particularly in the lower value end of the market.
Overall, MTW’s report presents cautiously optimistic trends for the outsourcing market with growth exceeding 50% for several end use sectors to 2022. However, the research also highlights the need for FM providers to identify the growing number of pitfalls and develop clear tactics to avoid these and enhance margins. The report is available to purchase from MTW Research’s website.