FM market 'turns corner'

Although average profitability of less than 4% of turnover reflects an industry still under pressure, the research, based on more than 60% of industry sales, suggests that the FM market has now turned a corner in terms of performance in 2011.

It says ‘total facilities management’ services are set to underpin market growth followed by an upsurge in demand for single service and ‘niche’ FM providers.

By 2015, the report forecasts market growth of 12% led by a number of key sectors in the private commercial market.

The 200-page report also highlights optimistic trends in terms of public sector demand, with health, education and transport spending unlikely to contract in the near term, despite the rapid public sector spending cuts by the coalition government.

MTW points to a wide range of factors impacting on market performance in the near term.
Public expenditure, climate change, migration, security, health and safety, economic growth, an ageing population and terrorism are just some of the issues discussed in the report.

A number of key strengths, weaknesses, opportunities and threats are also identified with the balance of factors suggesting a more positive scenario for 2012 onwards as the UK economy recovers and outsourcing demand increases.

The report segments the FM market by service type with forecasts of share growth in a number of sectors including multi-service outsourcing and security.

It says some single service providers may lose share in the medium term as larger clients seek to reduce their costs further and move toward a preference for ‘bundled service provision’.

MTW suggests that one market reaction to this is likely to be a growing polarisation in the market, with smaller single service providers seeking to develop more targeted, niche strategies in the SME (small to medium enterprise) sector in order to avoid competition with the larger FM companies.

MTW points to the Government remaining firmly focused on the private sector for growth by introducing a number of initiatives and funding opportunities for SMEs in 2011 which should also provide some optimism for single service providers targeting smaller contracts.

The research found that just over 60% of the industry is viewed as having either an ‘excellent’ or ‘good’ credit rating in mid-2011, reflecting a core strength in the market in terms of financial standing.

Following a rising number of business failures in 2009 and 2010, the number of single and multi service FM companies considered as being at ‘immediate risk’ of failure has declined since MTW’s last research study and now stands at around 2%, reflecting a significantly more healthy industry overall.

The report provides a comprehensive review of the UK FM market in 2011, forecasts to 2015 with product and end-use sector shares alongside four-year financial analysis for the key FM contractors.

With real term growth forecast in the market from 2013 onwards, the report concludes that there is an apparent tangible sense of optimism in the industry overall with healthy prospects for the majority of FM contractors and their suppliers from 2012 onwards.