The Facts, Market Overview, Key Insights and Trends for Facilities Services Buyers and Service Providers

The facilities management industry has grown dramatically over the past twenty years, owing to the continuous growth in urbanization and industrialization. Facility Management is defined as the means of providing maintenance support, user management and project management to increase the value of a building or infrastructure. 

The last two years have been a turbulent time to be a FM services provider (especially if you are a strategic government supplier). From the collapse of Carillion 2 years ago to a number of high-profile contract failures, many questions have been raised over the Model of Outsourcing and large contractors have often been in the news for all the wrong reasons.

Will 2020 be a new beginning?

In a climate of public controversy, media scrutiny and investor skepticism about suppliers to government, it is easy to lose sight of the facts.

The Facts

Typical punitive contract structure, EBITDA margin erosion (as low as 3%), high CAPEX and OPEX are common factors in the FM industry producing high stressed assets. Service Providers are spending more time in fixing operations. A lucky few who have fixed their operations are successfully mining their existing accounts by cross selling and upselling more services. Even the providers who have grown through acquisition in the past are constraint due to poor cash position with integrations taking longer than expected.

Gone are the times of market intimidation - Very few FM providers have new business win rates above 50% and retention above 80%. Some running as low as 10%. Many service providers have stopped measuring and continue to approach the market impulsively. Any provider can be displaced from their contract with the right strategic approach.

Where will FM Companies Revenue Growth Come from in the next 2 years?

Will the FM companies current growth drivers be valid in the post brexit Britain?

The Market Overview

The Global FM market size is around 1.2 to 1.3 trillion USD.

The 4 big service lines covering 1.1 Trillion USD (circa 95% of the FM Market) are Property Maintenance, Cleaning, Security and Catering.

UK – 120B GBP is the most matured market

In the UK, the Private Sector is expected to drive growth.

Local Government, Housing and Central Government are the popular Public Sector markets which includes fifty percent of the outsourced market.

Both growth and margins will continue to be under pressure from commoditisation and buyers robust contract models!

Buyers will be expecting service providers to demonstrate resilience and investors will expect service providers to break away from the pack.

Immediate Future of FM

Buyers

Buyers will continue to look for technology led payment by results modes and will expect service providers to integrate the supply chain (including buyers) with real time contract reporting, Social Value reporting and an expectation for providers to own and manage their Carbon Target.

Service Providers

Service providers will need bespoke regional delivery models to improve opportunities in the local community especially in the northern region. There will be increased need to work alongside trusted resourcing partners who can help reach out to local expertise, boost skill development, including apprenticeships, if they want to continue to operate especially in the Public Sector.
In addition to Brexit planning, service providers will also need to conduct a risk assessment of their operations around new government policies – carbon targets, social value etc.

Why not catch up with our FM Market insight Webinar  on demand - Growth opportunities in UK FM Market 2020 – 2023, Feb

• Which are the fastest growing customer segments in UK market?
• What types of services will see growth, and which are the ones that will face the maximum challenges due to the maturity of the market?
• What will the competitive landscape look like by 2023?

https://baachurain.com/events/

Wishing you all the success in the new decade
Baskar Sundaram - Baskar@baachu.com
At Baachu RAIN (www.baachurain.com) we are the UK’s ONLY Market Development & Strategic Research Specialists for Built Environment with a commercial intelligence database of 11000+ outsourced public and private sector FM tender opportunities.

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