UK Facilities Management Market – Key Insights and Trends

Web Dev
Web Dev

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 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. 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.

Looking at Top line, Many of the Top 50 FM Providers are in Financial Distress and Commercial Value of UK Contract – 0.5 (Commoditised Market) and decreasing!

Funds are drying with the European Investment Bank has already reduced deals with UK venture capitalists and private equity groups by more than two-thirds since the UK’s EU Referendum, with no equivalent funding from the UK government yet in place.

Where will FM Companies Revenue Growth Come from 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 are Property maintenance, Cleaning, Security and Catering. Fifty percent of outsourced market in North America and Western Europe: North America – 250 B USD and Western Europe – 350B USD.

UK – 120B GBP is the most matured market

Future of FM


Buyers will continue to drive towards Technology led payment by results model. Buyers will expect service providers to integrate the supply chain (including buyers) bringing together all of the services with real time contract reporting, Social Value reporting and manage their Carbon Target.

Service Providers

Service providers will continue to consolidate their supply chain towards more self-delivery and invest or collaborate for technology solutions to improve margins and showcase innovation. Service Providers will continue to move towards service integration, robust customer experience and sophisticated advisory services to keep growing and remain profitable.

Service providers will also need to invest on Government relations not a generic public relation if they want to continue to operate in Public Sector. Successful service providers will continue to extend, renew and mine existing contracts and will qualify new business even more carefully! In addition to Brexit planning, service providers will also need to conduct risk assessment of their operations around new government policies

The Market

There is high growth forecast in countries like France, Middle East and ASPAC. In the UK, the Private Sector is expected to continue its drive growth.

Local Government, Housing and Central Government are the popular Public Sector markets which includes fifty percent of the outsourced market. Other flourishing Public Sector markets include NHS and Education. M&A activity will continue apace with more consolidations.

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.

Your strategic roadmap

Critical questions for service providers?

  • Which geography have the fastest growth and how to enter those geographies?
  • How will the competitive landscape expected to look like by 2023?
  • Which are the fastest growing customer segments in UK market and how to enter the customer segment?
  • 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?
  • Who are your competitor’s top public and private sector customers?
  • How exposed are your competitors to individual contracts?
  • Who is winning (and losing) from this erosion in market share?
  • How does your go-to-market strategy compare to your competitors?

Critical questions for buyers ?

  • Which service providers are well placed in the market and how to encourage them to be in your procurement?
  • How will the FM market in UK evolve to 2023?
  • Which service provider(s) would be most exposed with the new governments policy change?
  • How does your go-to-procurement strategy compare to other buyers?
  • What impact will technology and new business models have on the future of your operations?

Thank you for reading my post. I hope the FM market overview in the article was useful. Regardless of your 2020 situation – My business does not have a strategic growth plan, my sales strategy is not working, I have no time to do strategy or my strategy team needs support, you are not alone!

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  • Web Dev says:

    Very interesting! Where can I subscribe?

  • Web Dev says:

    I’m glad you liked it!

  • Another great post! Keep up the good work!

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