THE ERIC RECKONING · Article 6 of 8
Insourcing, Outsourcing and the FM Market Picture ERIC Cannot Give You
FM Suppliers · NHS Estate Directors · Procurement Leads · Framework Bodies · Integrated Care Boards
ERIC collects two fields on FM delivery model: the percentage of services contracted out and the value of those contracted out services. These are the only nationally consistent data points on NHS FM insourcing and outsourcing trends available publicly. They are also structurally unreliable for FM market strategy. In 2026, a further complication has emerged. The estate is now being assessed not just for what it costs to maintain but for what it produces.
The only national picture and why it misleads
For FM suppliers trying to understand the NHS market, ERIC T02 and T03 are the starting point that almost everyone reaches for. T02 is the percentage of Hard FM and Soft FM contracted out. T03 is the value of those contracted out services. Year on year movement in these fields is the closest thing to a national insourcing and outsourcing trend indicator for NHS FM.
The NHS FM market has been moving through a significant insourcing trend, driven by the Carter Review recommendations, post pandemic workforce concerns, and ICS integration pressures. That trend is real. It shows up in contract award data. But the scale and pace of that trend as it appears in ERIC is distorted by structural factors that the headline percentage does not reveal.
Four distortions in the contracted out figure
The first distortion is PFI inclusion. The contracted out percentage in ERIC includes PFI providers and NHS Property Services. PFI is a financing and construction delivery structure, not commercial FM outsourcing in the market sense. A trust with a substantial proportion of its estate under PFI will report a substantially higher contracted out percentage than a trust with no PFI, even if both use
exactly the same level of commercial FM services. In many acute trusts, PFI costs represent 40 to 60% of what appears as outsourced value in the ERIC data. Stripping PFI out, the genuine commercial FM market is significantly smaller than the headline ERIC figure suggests, making every live tender considerably more competitive than the aggregate data implies.
The second distortion is NHS Property Services estimation. The BMA’s 2025 survey found that 65% of NHS Property Services tenants received incorrect service charge invoices. ERIC instructs trusts occupying NHS Property Services premises to obtain data from their landlord and, where commercial in confidence applies, to provide a reasonable estimate. Where the invoices are disputed and incorrect, the estimates are unreliable.
The third distortion is the Wholly Owned Subsidiary blind spot. Many trusts have insourced FM into a Wholly Owned Subsidiary, a separate legal entity that is NHS owned but operates as an independent organisation. In ERIC, a WOS can appear as in house because it is NHS owned, or as contracted out because it is a separate legal entity, depending on how the individual trust interprets the T02 field definition. In some cases, the VAT recovery status of the WOS dictates how it is recorded, a decision that has nothing to do with FM operational strategy and everything to do
with accountancy. ERIC’s 2012-era definitions treat the NHS FM market as a binary: in or out. The reality is a shadow market of subsidiaries and SLAs that ERIC cannot classify consistently.
The fourth distortion is SLA exclusion. Services provided by another trust under SLA using NHS staff are excluded from contracted out figures but included in total cost. This distorts the insourcing percentage for trusts in collaborative arrangements.
| What ERIC T02 and T03 show | What they cannot tell you |
|---|---|
| Percentage of Hard and Soft FM reported as contracted out | Whether that percentage reflects genuine commercial FM outsourcing or PFI and NHS Property Services |
| Year on year change in contracted out percentage | Whether the change reflects genuine insourcing or definitional and methodology variation |
| Total value of contracted out FM services | Whether that value includes PFI costs that inflate the commercial market picture |
| Broad direction of insourcing and outsourcing trend | Whether insourcing is into the trust directly, a WOS, or an SLA arrangement |
| National aggregate contracted out position | Individual trust decisions, contract structures, or the performance of any arrangement |
The bricks to clicks productivity dimension
In 2026, a further layer has been added to what the estate needs to demonstrate. The Capital Guidance uses the phrase bricks to clicks in describing the shift from physical infrastructure to digital productivity. The £1 billion per year technology and productivity ringfence is aligned to the NHS 2% annual productivity ambition, and capital bids for modernisation must demonstrate how investment will deliver specific productivity gains.
The guidance explicitly requires that investment proposals prioritise productivity of existing capacity before targeting new capacity. ICBs and providers are instructed to make best use of existing estate to drive productivity. Capital bids must consider opportunities to maximise estate utilisation, including use of void and underutilised space. The implication for FM is direct: an estate that ERIC shows as having significant void clinical space will struggle to make a capital case for expansion or modernisation under the new value for money review thresholds.
For FM suppliers, the productivity agenda changes what the estate management brief looks like in a high performing NHS contract. It is no longer enough to maintain compliance. The contract now sits within a framework where the estate’s productive output, its throughput per square metre, its utilisation rates, its contribution to the trust’s 2% productivity ambition, is visible at a national level and is informing capital allocation decisions. FM contractors who help their clients build that evidence base add value that extends beyond the maintenance specification.
The insourcing trend that ERIC appears to show is real in some parts of the NHS and considerably overstated in others. Once PFI is stripped out and WOS arrangements are properly categorised, the genuine commercial FM market is smaller and more competitive than the headline data suggests.
What the actual NHS FM market picture requires
Understanding the NHS FM market well enough to position a supplier, design a framework, or make an investment decision requires intelligence that sits below the national aggregate. It requires knowing which trusts are in active procurement, what contract structures they are using, what value contracts are awarded at, how long they run, and through which procurement routes they are tendered.
The BCIS Intelligence Series examined the same gap in construction cost benchmarking. BCISOpX provides an aggregated average of FM operational costs that tells you what the average looks like, not what comparable trusts are actually paying. The gap between the BCIS average and live market pricing is where bid decisions are won and lost, and it can only be closed with contract level intelligence.
Baachu Rain tracks 11,000 plus UK FM contracts covering a substantial NHS subset. That data gives you the contract level picture that ERIC’s aggregate cannot: what the NHS FM market is actually doing, who is winning work, at what price, through which frameworks, and against which scope. For FM suppliers navigating the insourcing trend, that intelligence distinguishes the trusts that have genuinely committed to in house delivery from those that have insourced management while continuing to contract out specialist services.
The risk
FM market strategy built on ERIC contracted out data may be built on figures that systematically misrepresent the scale of commercial FM activity due to PFI inclusion, WOS classification inconsistency, and NHS Property Services estimation. The genuine commercial market is smaller than ERIC suggests. Every live tender is more competitive than the aggregate data implies.
Working in NHS FM procurement, estate strategy or contract delivery?
Baachu Rain is the UK’s only dedicated FM market intelligence platform, tracking 11,000 plus contracts worth £49.2 billion including a substantial NHS estate subset. Our intelligence sits in the layer ERIC cannot reach. hello@baachu.com · baachurain.com
Next in the series · Article 7 of 8
Flying Blind: How the Backlog Trajectory Is Driving Decisions It Cannot Support
This article represents Baachu’s independent analysis based on publicly available information, including NHS England ERIC publications and data quality statements. Baachu Works Limited has no commercial relationship with NHS England, NHS Property Services, or any FM provider, NHS trust, or estate services firm referenced in this series. This article is not legal or financial advice.