FM in health and education - AMA Report

07 April 2009

The Healthcare and Education sector is due to receive a boost over the short to medium term from
the Government’s decision to bring forward £3bn of capital spending to 2009-10 from 2010-11

The FM market has shown good growth since the early 1990’s, influenced by the desire to control operational efficiencies and costs, as well as more recently a trend within the private sector for companies to refocus their business in order to concentrate on core competencies. Further growth since the turn of the millennium was influenced by the buoyant state of the economy, as well as public sector developments funded through the Private Finance Initiative (PFI)/ Public Private Partnerships (PPP).

This has contributed to an overall market value for outsourced ‘bundled’ services and TFM of almost £14.5bn in 2008. This report is specifically focussed upon the Healthcare and Education application sectors, representing some of the most dynamic end use sectors for outsourced FM services over the
last decade. Accounting for an estimated 18% of the overall market, the market for outsourced ‘bundled’ services within the Healthcare and Education sectors is valued at around £2.6bn in 2008, with the development of this market between 2007 and 2013 illustrated in the chart:

The UK economy is currently forecast to remain weak over the short to medium term, with the
potential for a slow return to growth from 2010 at the earliest. While the downturn in the
economy is expected to have a negative impact on the growth of the overall FM market, the
Healthcare and Education sector is due to receive a boost over the short to medium term from
the Government’s decision to bring forward £3bn of capital spending to 2009-10 from 2010-11
in order to provide some impetus to the economy. However, this measure will result in lower
departmental capital expenditure limits in 2010-11, resulting in more moderate growth in the
sector in the medium to longer term even though the overall economy is expected to slowly
recover in that period.

The penetration of FM outsourcing within the Healthcare sector is estimated at around 40-
50%, with outsourcing generally higher for ‘soft’ rather than ‘hard’ services. The healthcare
sector is largely approaching maturity, with limited potential for growth particularly in the
acute hospital sector, although there remain opportunities in the primary care sector.

In contrast the education sector is less mature with outsourcing accounting for around 21% of
overall FM provision by value, leaving considerable potential for growth. Historically
outsourcing has often taken the form of single service contracts, although TFM provision is
increasing, with a boost likely to arise as a result of the BSF programme.

As the market has continued to mature over the last few years, the number of new market
entrants has slowed significantly. Indeed, the FM market has recently experienced an
unprecedented number of mergers and acquisitions, as well as number of business failures
and market withdrawals. The level of acquisitions has been largely influenced by market
maturity, as well as changes in procurement practices, with end users seeking to reduce
procurement costs by using fewer suppliers each of whom provide multiple services.

AMA Research’s report “Facilities Management Outsourcing – Health and Education
Markets – UK 2009-2013” is available in hard copy or electronic format for £745 and can be
ordered online at www.amaresearch.co.uk or by calling 01242 235724.