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AMA Research have published the 10th edition of the report ‘Facilities Management Outsourcing Market Report – UK 2014-2018 Analysis’. Incorporating original input and primary research, the report provides a wide-ranging and informative perspective on the sector, with a focus on the provision of Total Facilities Management and ‘bundled’ or multi-service provision. Key areas covered by this report include:

• Overview of Multi-Service Provision in the UK FM outsourcing market -
size, recent trends and key market influences, forecasts and future prospects.


• Analysis of 3 key end-use sectors for Corporate, Central & Local Government, Healthcare & Education – sector sizes / performance, trends and influences by sector and potential areas of opportunity.


• Review of Market Structure and Leading Providers – changing supply structure, diversification of service provision and company profiles for the leading contractors.

The global economic downturn has caused a period of turbulence within the FM outsourcing market, with financial constraints being imposed on both the private and public sectors. This has curbed demand in some areas of the corporate market – such as the retail sector. However, it has actually provided a positive stimulus in the public sector as outsourcing has been viewed by many authorities as a route to meeting punishing budget cuts. The trend to bundled service contracts has continued, driven partly by clients with positive experiences seeking to outsource more functions and partly by providers increasingly broadening their range of services in order to remain competitive. Although the UK economy has recovered since the last report, the positive outlook predicted by many forecasters is jeopardised by uncertainty and this will result in more clients seeking either to shorten contract lengths or at least to build in contingency clauses.

Areas of particular interest:

• Market activity from 2008 to 2013, with forecasts through to 2018.


• The trend towards bundled services and total facilities management as clients seek to consolidate supply chains and reduce costs.


The broadening of service offerings by existing providers - creating intense competition.


• The development of specialist niche services within existing sectors - driven by providers seeking to differentiate.


• Growing client awareness of the risks associated with long term contracts - tighter provisions can be expected.


Major Companies profiled:

Amey Group, Aramark UK, Babcock International Group, Balfour Beatty Workplace, BAM Facilities Management, Capita Group, Carillion Facilities Management, Cofely, EC Harris Solutions, Emcor Facilities Services, Enterprise, Eric Wright Group, ETDE Energy and Services Division, Europa Support Services, Facilities Services Group, G4S Facilities Management, Gardiner & Theobald Facilities Management, Global Workplace Solutions, Hochtief Facilities Management, Initial Facilities Services, Integral UK, Interserve Support Services, Inviron, ISS UK, John Laing Integrated Services, Kier Facilities Services, Mapeley, MITIE, Morrison, Norland, Norse Group, OCS Group, Pinnacle PSG, Robertson Facilities Management, ROMEC, Serco Group, SGP Property and Facilities Management, Skanska Facilities Services, Sodexo Facilities Management, Telereal Trillium, Turner Facilities Management, Vinci Facilities, Volker Fitzpatrick.

Key areas covered in the report:

THE MARKET

• Facilities Management Market overview – estimates of total market size from 2008-2013, with forecasts for the period from 2014 to 2018.


• Overview of overall support services outsourcing market - market size, sector shares, analysis by sector.


• Key market influences – diversification in service provision, public sector spending (including influence of PFI/PPP) and legislative influences.


• Future prospects for FM market covering macro-economic influences and government departmental expenditure, outlook by end-use application area, key potential growth areas, trends in service provision, changing supply structure, impact of market maturity, legislation and other key influences.


KEY END-USE SECTORS

• Analysis of FM market by broad end-use sector - Corporate, Central & Local Government, Healthcare & Education.


• Estimates of market size for each sector from 2008 – 2013, with forecasts from 2014 to 2018. Review of mix of contracted-out/in-house trends. Key factors influencing trends within each sector.


• 'Corporate sector' – sector development and trends, booming office demand in London, take up levels, penetration and market maturity, analysis of sub sectors – corporate offices, retail, leisure, manufacturing etc.


• Central & Local Government Sector – market mix, key growth sectors and areas of opportunity, influence of PFI/PPP. Analysis by department for Department of Work and Pensions, Ministry of Justice, HM Revenue & Customs, Local Authorities, and Social Housing. Central versus Local Government mix.


• Healthcare & Education Sector – market mix, outsourcing penetration levels, influence of PFI/PPP, procurement trends and opportunities.


CONTRACTORS REVIEW

• Review of origins of FM companies – construction, engineering, support services, property services and special purpose vehicles.


• Structure of supply – Business Process Outsourcing, TFM contractors and support services providers.


• Key trends – period of acquisitions & mergers, impact of market maturity & margin erosion, expansion and diversification of service provision.


• Market Shares of leading providers.


• Company profiles of leading FM providers covering over 30 major providers and niche specialists – outline includes company size, growth trends, areas of specialisation, sector strengths and major contracts.

The market for outsourcing bundled and Total Facilities Management services was valued at just over £18.5 billion in 2013. The facilities management market has exhibited good levels of growth for much of the last twenty years, influenced by organisational desires to control non-core operational efficiencies and costs, and a trend within the private sector for companies to refocus their business in order to concentrate on core competencies.

The deterioration in the UK economy from mid to late 2008 had a negative impact on the development of the overall FM market, with reduced opportunities in the corporate sector. This resulted in a slow-down in growth in from 2008. Previously the Labour Government’s policy to stimulate economic growth through public sector spending had supported the FM market. However, the Coalition’s focus on reducing the deficit has removed this stimulant. This market has now returned to more positive growth and will continue to show annual growth, reaching a forecast £23.2 billion by 2018.

The impact of public sector spending cuts is not clear at the moment. The Government estates will undoubtedly shrink but our forecasts assume that outsourcing will be viewed as a means of saving costs - more so than an expenditure element to be cut. In addition some government cuts in the education sector for example have not led to construction output reductions, as Universities and Academies appear to have been successful in drawing in private sector investment.

The market is considered to be relatively mature across a wide range of sectors. However, whilst the progress of the FM market is likely to mirror the performance of the overall economy more closely in future, there are still value-added niche services to be exploited. There are also newer forms of service which are far from mature – such as energy management, compliance services and workspace management – which, if approached professionally, will broaden the industry’s scope and client base.

PFI/PPP schemes have provided significant impetus for growth over much of the last decade with DBFO schemes commonly incorporating long-term FM concessions. This trend is now slowing as spending cuts take effect. The economic downturn has heightened price competition in the market with end-users seeking better value for money. This has had a negative impact on contract prices and has resulted in lower market values and tighter margins. In addition the climate has led to clients seeking shorter contract lengths and more flexible terms.

The development of the facilities management market has been positively influenced by the trend to outsource an increasing array of services, with a gradual shift towards ‘bundled service’ and TFM contracts adding to contract values. The corporate market represents the largest end use sector, accounting for more than 50% of the market, with central and local government accounting for around a quarter. Healthcare and education have been the most rapidly growing sector in recent years and now represent 18% of the market, though the growth of this sector has now slowed sharply.

Industry profitability has been very variable recently, with several providers surviving on wafer thin margins and sometimes even making losses. The last few years have seen consolidation in the supply structure of the FM market, with a number of mergers, acquisitions, business failures and market withdrawals. Initially prompted by market maturity and the trend for large FM companies to make strategic acquisitions in order to increase their range of services and competitive position, the more difficult trading conditions have also influenced this trend to consolidation. There has been a trend towards FM contracts with national or global coverage favouring larger multi-national FM providers and encouraging strategic acquisitions, which enhances overseas strength and operations.

Post-recession, the outlook for the UK economy remains positive but fragile. Recent GDP growth figures have looked encouraging but with the public sector deficit still not under control and with the instability in the Eurozone, the positive progress suggested by these figures may not be sustained. Maturity in the FM market makes it more dependent upon the economic climate for any growth motivation, through its influence on the prospects for organic growth. There are, though, some compensating factors, with new forms of FM being introduced. On balance, the outlook for the FM market should remain quite positive, with annual growth fluctuating around the 4-5% level.

The key to advancement will be maintaining a high standard of service in core activities whilst adding value by offering enhancements and differentiated services. A key area of opportunity in the public sector is likely to arise within local authorities. This sector retains potential for an increase in the level of outsourcing, which may provide an opportunity to meet cost savings required.

The Government has committed to reducing the level of public sector debt, resulting in reduced levels of expenditure across virtually all government departments. The size of the Government estate will undoubtedly shrink and there will inevitably be some negative effects. However, there will also be a positive impetus from those Departments which view outsourcing as a means of achieving cost control at worst and cost reductions at best.

As the cost benefits of energy reduction become more widely integrated into FM contracts many procurement officers will see FM as a higher-efficiency and possibly lower cost option, as the supplier is able to keep abreast of all the latest technologies and control costs accordingly, something which they would find more challenging to do in-house. The buoyant performance of the Health and Education sectors will undoubtedly moderate as policy within both sectors shifts from infrastructure improvements to improving user services.

Levels of non-domestic construction output have an impact on the FM market, with the commencement of new facilities management contracts commonly linked to the uptake of new premises. There has been some growth since the crash caused by the recession, although this stalled in 2012 as confidence faltered in the wake of the Eurozone crisis and the public sector cuts. However, business has picked up in 2014 and there is expectation of modest growth for the next few years.

The overall FM market will continue to benefit from the shift away from single service contracts towards bundled service and total facilities management packages. The trend for private and public sector clients to outsource an increasing number of services, as well as to reduce procurement costs through seeking ‘one-stop-shop’ solutions is expected to continue, adding to contract values and favouring larger facilities management providers which can supply the full range of services required.

Table Of Contents

Facilities Management Outsourcing Market Report - UK 2014-2018 Analysis
1. INTRODUCTION 7
1.1 BACKGROUND 7
1.2 SOURCES OF INFORMATION 7
2. SUMMARY and FUTURE PROSPECTS 9
2.1 EXECUTIVE SUMMARY 9
2.2 FUTURE PROSPECTS 11
3. ECONOMIC ENVIRONMENT 12
3.1 GDP 12
3.2 INFLATION and INTEREST RATES 13
3.3 UNEMPLOYMENT 14
3.4 HOUSEHOLD CONSUMPTION 15
3.5 HOUSING and CONSTRUCTION 15
3.6 STERLING 16
3.7 POPULATION PROFILE 17
3.8 CONCLUSIONS 18
4. FACILITIES MANAGEMENT OUTSOURCING MARKET 19
4.1 DEFINITION 19
4.2 MARKET SIZE AND TRENDS 20
4.3 KEY MARKET INFLUENCES 25
4.3.1 Diversification in Service Provision and Contract Periods 25
4.3.2 Non-Domestic Construction Output 25
4.3.3 Public Private Partnerships 27
4.3.4 Legislation 30
4.4 SERVICES AND SERVICE PROVISION 32
4.4.1 Service Provision 32
4.4.2 Service Mix 33
4.4.3 Cleaning 33
4.4.4 Building Maintenance 34
4.4.5 Security 36
4.4.6 Catering 38
4.4.7 Mechanical and Electrical Services (MandE) 40
4.4.8 Energy Management 40
4.4.9 Waste Management 41
4.4.10 Other Services 42
5. KEY END USE SECTORS 43
5.1 OVERVIEW 43
5.2 CORPORATE SECTOR 44
5.2.1 Market Size and Trends 44
5.2.2 Key End Use Markets 48
5.3 CENTRAL and LOCAL GOVERNMENT 57
5.3.1 Market Size and Trends 57
5.3.2 Key End Use Markets 60
5.4 HEALTH and EDUCATION SECTORS 70
5.4.1 Market Size and Trends 70
5.4.2 Key End Use Markets 73
5.4.3 Major FM Contracts - Health and Education 81
6. CONTRACTORS REVIEW 83
6.1 ORIGINS AND SUPPLY STRUCTURE 83
6.2 MARKET SHARES 85
6.3 COMPANY PROFILES 86
6.3.1 Leading 20 FM Contractors 86
6.3.2 Other FM Contractors 112
CHART 1 UK BUNDLED FM OUTSOURCING MARKET AT CURRENT PRICES £BN 2008 - 2018 9
TABLE 2 GDP DATA - 2011-2014 - KEY CONSTITUENT ELEMENTS 12
CHART 3 INTEREST RATES AND INFLATION (CPI) FROM 1994-2018 14
CHART 4 PDI and SAVINGS RATIO AT CURRENT PRICES 1995-2018 15
TABLE 5 EXCHANGE RATE FLUCTUATIONS 2009-2015 - STERLING TO THE DOLLAR, AND THE EURO, SPOT RATES 17
TABLE 6 UK FM MULTI-SERVICE OUTSOURCING MARKET 2008 -2018 £M (AT CURRENT PRICES) 21
TABLE 7 NON-DOMESTIC CONSTRUCTION NEW WORK OUTPUT BY SECTOR 2008-2018 (£BN) AT CURRENT PRICES 26
TABLE 8 CURRENT PFI PROJECTS ACROSS GOVERNMENT BY DEPARTMENT 2013 27
CHART 9 NUMBER AND COMBINED CAPITAL VALUE OF PFI PROJECTS SIGNED ANNUALLY 2002 TO 2012 28
TABLE 10 PROJECTED SERVICE PAYMENTS UNDER PFI CONTRACTS - 2008/2009 TO 2019/2020 29
CHART 11 UK NON-CORE SERVICES MARKET BY TYPE OF OPERATION 2013 32
CHART 12 SERVICE MIX OF BUNDLED FM MARKET BY VALUE (%) (CLEANING, SECURITY, CATERING ETC) 2013 33
CHART 13 BUILDING MAINTENANCE PRODUCT MIX BY VALUE 2013 (%) 35
TABLE 14 CONSTRUCTION RMI OUTPUT 2010 - 2018 (£M) AT CURRENT PRICES 36
CHART 15 UK MIX OF CATERING PROVISION - IN-HOUSE, OUTSOURCED BUNDLED, OUTSOURCED SINGLE-SERVICE. 39
CHART 16 UK FM SERVICES MARKET SHARE BY VALUE - 2013 43
TABLE 17 UK CORPORATE FM OUTSOURCING MARKET 2008-2018 (AT CURRENT PRICES) 45
TABLE 18 CONSTRUCTION NEW WORK OUTPUT - CORPORATE END USE MARKETS 2008-2018 (£BN) CURRENT PRICES 47
CHART 19 UK CORPORATE FM BY END USE SECTOR 2013 48
TABLE 20 RETAIL TURNOVER EXCLUDING AUTOMOTIVE FUEL SEGMENTATION AND GROWTH BY SECTOR 2013 50
TABLE 21 RETAIL TURNOVER EXCLUDING AUTOMOTIVE FUEL (£BN) 52
TABLE 22 FM CONTRACTS - MUSEUMS and LIBRARIES 2013-2014 53
TABLE 23 MAJOR FM CONTRACTS - AUTOMOTIVE INDUSTRY 2013-2014 55
TABLE 24 MAJOR FM CONTRACTS - ENERGY INDUSTRY 2013-2014 56
TABLE 25 MAJOR FM CONTRACTS - AIRPORTS 2013-2014 57
TABLE 26 UK CENTRAL and LOCAL GOVERNMENT FM MARKET 2008-2018 (CURRENT PRICES) 58
CHART 27 MIX OF FM MARKET BY VALUE, CENTRAL and LOCAL GOVERNMENT - 2013 60
TABLE 28 SOCIAL HOUSING - MAJOR BUNDLED FM CONTRACTS 2013-2014 62
TABLE 29 TOTAL AREA OF HOLDINGS AND PROPERTY COSTS BY GOVERNMENT DEPARTMENT 63
TABLE 30 CENTRAL GOVERNMENT - MAJOR BUNDLED FM CONTRACTS 2013-2014 66
TABLE 31 LOCAL AUTHORITY SERVICE RESPONSIBILITIES 67
TABLE 32 LOCAL GOVERNMENT CONTRACTS - COUNTY COUNCILS - 2013-14 68
TABLE 33 LOCAL GOVERNMENT CONTRACTS - BOROUGH COUNCILS - 2013-14 69
TABLE 34 LOCAL GOVERNMENT CONTRACTS - OTHER AUTHORITIES - 2013-14 70
TABLE 35 UK EDUCATION AND HEALTHCARE BUNDLED FM OUTSOURCING MARKET 2008-2018 (£M) 71
TABLE 36 CONSTRUCTION NEW WORK OUTPUT 2006 - 2016 (£M) AT CURRENT PRICES - PRIVATE and PUBLIC HEALTH AND EDUCATION SECTORS 72
CHART 37 MIX OF FM MARKET BY VALUE BETWEEN THE HEALTH AND EDUCATION SECTORS - 2013 73
TABLE 38 NHS COMMISSIONING REGIONS NUMBER OF HEALTHCARE FACILITIES 74
CHART 39 NHS HEALTHCARE TRUSTS % OF FACILITIES SERVICES OUTSOURCED 75
CHART 40 SERVICE PROVISION MIX (IN-HOUSE, BUNDLED, SINGLE ETC) BY VALUE 2012/13 (%) 76
TABLE 41 ESTIMATED SERVICE MIX IN OUTSOURCED FM IN THE HEALTH SECTOR (CLEANING, BLDG and ENG, CATERING ETC) 2012/13 77
CHART 42 PUBLIC SECTOR SCHOOLS EXPENDITURE (£ MILLION) - BOUGHT-IN PROFESSIONAL SERVICES 80
CHART 43 PUBLIC SECTOR SCHOOLS EXPENDITURE ON SELECTED SERVICES (£M) 81
TABLE 44 MAJOR FM CONTRACTS - HEALTH and EDUCATION SECTORS 2013-2014 82
TABLE 45 TOP 20 FM SUPPORT SERVICES COMPANIES IN THE UK 85

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