Housing in the United Kingdom represents the largest non-financial asset class in the UK. About 30% of homes are owned outright by their occupants, and a further 40% are owner-occupied on a mortgage. About 18% are social housing of some kind, and the remaining 12% are privately rented.
The UK ranks in the top half of European countries with regard to rooms per person, amenities, and quality of housing. However, the cost of housing as a proportion of income is higher than average among said countries, and the increasing cost of housing in the UK may constitute a housing crisis forx some, especially for those in low income brackets or in high-cost areas such as London.
Residential and Housing players in the UK are responsible for development, building, purchase, and refurbishment of residential homes across the region. The Ministry of Housing, Communities, and Local Government is a ministerial department, supported by 12 agencies and public bodies which is responsible for creation of places to live and work.
Latest Trends in Housing Sector in UK
- The latest house price data published on gov.uk by HM Land Registry (HMLR) for July 2022 show that average house prices in the UK increased by 15.5% in the year to July 2022, up from 7.8% in the year to June 2022. This jump in annual inflation was mainly because of a base effect from the falls in prices seen this time last year, as a result of changes in the stamp duty holiday. Average UK house prices increased by £6,000 between June and July this year, compared with a fall of £13,000 between the same months in 2021.
- This is the highest annual inflation rate the UK has seen since May 2003.
- This jump in annual inflation was mainly because of a base effect from the falls in prices seen this time last year, as a result of changes in the stamp duty holiday.
- Average UK house prices increased by £6,000 between June and July this year, compared with a fall of £13,000 between the same months last year.
- The average UK house price was £292,000 in July 2022, which is £39,000 higher than this time last year.
- Average house prices increased over the year in England to £312,000 (16.4%), in Wales to £220,000 (17.6%), in Scotland to £193,000 (9.9%) and in Northern Ireland to £169,000 (9.6%).
What is net zero for the UK?
The government has legislated for the UK to reach net zero carbon emissions by 2050, with intermediary targets of a 68% reduction by 2030 and a 78% reduction by 2035 (compared to 1990 levels). Net zero for the country as a whole simply means that the amount of carbon/greenhouse gases emitted by the UK minus any ‘offsets’ (e.g. carbon absorption through mass tree planting) or ‘capture’ (deployment of carbon capture technologies) equals zero, or better.
Role of Housing Sector in achieving net zero
According to the Climate Change Committee (CCC), in 2019 the direct burning of fossil fuels to heat space and water in homes accounted for 13% of the UK’s total carbon emissions. The CCC is clear that, for the UK as a whole to meet net zero by 2050, there must be a complete elimination of these emissions from housing. The modelling behind the CCC’s main ‘Balanced Pathway’ is predicated on 100% elimination of these carbon emissions by 2048 and their more rapid scenarios see housing eliminate these emissions by 2044.
What carbon emissions are we talking about?
In order to reach a conclusion on how to define net zero for the housing association sector we must first decide on the scope of the carbon emissions we are seeking to eliminate. Housing associations will directly produce or contribute to a wide-range of carbon emissions. This will include for example, carbon emissions produced from staff commuting and using organisational fleet transport, from energy usage in office buildings, from construction of new homes and emissions from gas boilers in housing stock. There are a few key definitions for emissions we can draw upon to help us understand the scope of the challenge.
Direct emissions in housing stock
Direct emissions are the carbon emissions produced directly from the burning of fossil fuels in homes to heat space and water, e.g. gas boilers.
Indirect emissions in housing stock
Indirect emissions are emissions produced from the burning of fossil fuels in power stations to generate electricity or heat (not in a home) which in turn supplies heating sources in homes for space and water. This includes for example, the carbon emissions resulting from the production of electricity in a power station that powers an electric heat pump in a home, the carbon emissions produced by a heat network that feeds a home or the carbon emissions resulting from hydrogen production that feeds a hydrogen boiler in a home. These emissions only exist when the production of such electricity/heat/hydrogen outside the home is not net zero.
Facilities Management (FM) Services in UK
The UK is one of Europe’s most developed and comprehensive markets for facility management services with regard to size & sophistication. Due to the widespread use of facility management services, vendors are now increasingly focusing on using specialized services to gain a foothold in the market, which has also witnessed several changes due to the macro-economic and social changes in the country.
Over the last decade, several service vendors operating in the country have been focused on expanding their presence to leverage the growing demand for facility management, especially with the recent trend favouring the outsourcing of non-core operations. The country has been witnessing an increased number of opportunities to leverage facility management and corporate real estate in innovative ways, given the dynamics across the country.
Key trends suggest that the United Kingdom continues to attract investment opportunities from global specialist facility management companies to address challenges in the local, fragmented markets. Large strategic buyers are highly active, mopping up smaller rivals, and private equity investment is rising as financial sponsors continued to finance the deployment. Moreover, technology-enabled business models have resulted in rising valuations in the country.
FM Services for Housing Sector
Residential and Housing players in the UK are responsible for development, building, purchase, and refurbishment of residential homes across the region. The sector contributes a significant share in the business portfolio of large FM Suppliers and other small & mid-sized companies.
Looking at the current volume of running agreements between Housing Companies with suppliers of various FM services, the sector is as large as ~£10.1 billion in terms of Total Contract Value. The sector procures multiple services from FM suppliers including Hard and Soft FM with a bulk of the agreements being sourced under Hard FM services.
Repair & Maintenance, Construction, M&E, Refurbishment, Cleaning, Catering, Security are few among a large pool of services procured by this sector. Through this article we will have a look at several aspects of the role played by FM suppliers for the Housing Sector.
Service dissection
Total Market Size ~£10.1 billion
- The Housing sector procures Hard services which include Repair & Maintenance, Construction Works, M&E and Refurbishment services the most among all FM Services. These services constitute around 80% of Total contract value. The services are as large as ~£1 billion in value terms.
- The Soft FM services procured by the sector are in excess of ~£1 billion in TCV with Cleaning services leading at £320 Million worth of contracts followed by Catering & Security. These services have a 10% share of all FM services to this market sector.
- The Integrated FM services which are preferred by some buyers for ease of dealing with a single supplier own contracts worth ~£965 Million and a 10% share of the overall value business.
Upcoming Opportunities in the Housing Sector
A look at the upcoming opportunities through contract renewals suggests a robust pipeline from renewal business in the next six quarters for FM suppliers from the Housing sector. The said period offers an opportunity as large as ~£1.3 billion from more than 100 contract renewals. The graph below depicts the quarterly volume that will be available for procurement for the defined period for FM suppliers apart from any new contracts.
Total Market Size ~£21.5 billion
Main Stakeholders
Apart from the Central Government Entities who are the key buyers of FM outsourcing services, there are scores of FM suppliers who cater to these outsourcing needs. A look at the key players on the supply side gives a clear idea that large FM Supplier groups dominate the list of suppliers to this sector.
The key suppliers of FM services to Housing Sector are mainly large business groups operating in several markets across the globe with multiple business interests. Mitie, Mears, Kier, Amey, Axis Group to name a few are global corporations that cater to FM outsourcing needs of this sector in UK.
Apart from serving the Housing Sector, the overall FM market in UK is one of the largest markets in Europe in terms of maturity and sophistication. The market is highly competitive owing to the presence of several organized players and strong presence of top global companies, such as Mitie, ISS, Sodexo, CBRE, JLL among others. It is a large market with some estimates putting the annual revenues in the vicinity of 40-45 Billion USD.
As per Baachu Database, however, the total contract value remains in the range of £100 Billion for Contracts with terms ranging from one to 10 Years on an average. To have a detailed view of the UK FM Market with complete sector & services breakdown, please download our comprehensive report here https://baachurain.com/product/uk-facilities-management-market-2022-2025-report/. This report is unique for its treatment of the growth aspect being based on the real contracts and their value. The report complements similar report from Frost & Sullivan as that report gives a glimpse of future growth based on revenues while Baachu has used Total Contract Value as the basis.
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