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Local government - an opportunity for FM

06 May 2011

Research on the potential for growth for outsourced FM services in the central and local government sectors is published by AMA Reseach.

Facilities Management Outsourcing – Central and Local Government Markets - UK 2011-2015 focuses on the provision of multi-service or integrated contracts within the Central and Local Government sectors, in the context of which we estimate a market size of just over £4bn. The market has seen steady performance in recent years, and is likely to continue to maintain value around the £4 billion mark, although there will be some loss as social housing activity slows.
In the 1990s, rapid growth was experienced in the FM market as corporations and public sector organisations began to outsource non-core services. Since 2000, the trend towards outsourcing continued aided by good economic conditions and high levels of construction.
Uncertainty in the global financial market has hit business and consumer confidence in recent years. This has resulted in some slowdown in the outsourcing of FM, with fewer opportunities available for market expansion.
The central and local government market is estimated to have grown just 1 percent in 2010 as, following the formation of the Coalition Government, the focus of government policy shifted away from government spending to stimulate the economy towards significant public sector expenditure cuts as the coalition seek to eliminate the structural deficit.
There is hope that the budget cuts will see departments, particularly in local authorities where FM penetration is lower, moving towards greater levels of outsourcing and bundling of services in order to meet efficiency savings, with larger contracts becoming available and boosting both these end use markets.
Social housing is the largest end user within the central and local government FM outsourcing market. FM Outsourcing within Social Housing is well established and is generally considered to be mature, dominated by a number of large, specialist providers such as Mears, Keepmoat and the Apollo Group.
The local government sector is widely thought to be the sector with the greatest potential. With relatively low penetration of facilities services outsourcing and large budget cuts to be made without reducing front line services, it is thought likely that outsourcing will increase and more efficient bundling could gain ground from single service contracts.
Companies offering total FM tend to focus on a specific end user group in order to be able to offer a comprehensive range of products and services. The larger companies may focus on a wider end user base, offering services to the private and public sectors, but will usually have a stronger history of working in one or the other. The public sector, in particular, is dominated by these larger companies due to the large contracts on offer, particularly within PFI/PPP.
Following expansion in the late 1990s, early 2000s, the market has started to mature and new entrants to the market have slowed as it nears saturation point. The trend to consolidate and focus on core services, rather than diversify into new operations has added to the slow down, as have the worsening trading conditions, making entry into a new arena difficult. The area where entrants are most common is in niche, specialist sectors such as those supporting the local authority leisure sector.
AMA Research’s report “Facilities Management Outsourcing - Central and Local Government Markets – UK 2011-2015” is available in hard copy or electronic format for £795 and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.


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