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FM market boosted by post-election surge in 2015

08 June 2015

A new report on the UK Facilities Management from MTW Research suggests that the pre-election slowdown in growth has now passed, with many FM providers reporting strengthening order pipelines.

With some clients having postponed business decisions until after the general election, the research found an element of pent up demand which is now set to be released during the remainder of 2015 and into 2016. The report also indicates that capital investment levels are experiencing stronger growth, boosting the ‘hard FM’ sector which has lagged behind the ‘soft FM’ market in recent years.

MTW’s analysis of more than £70 billion of FM sales found more than 60% of the market experienced sales growth in the last 12 months. This rising level of optimism is not necessarily reflected across the entire FM market, according to MTW, though there are an
increasing number of end use sectors reporting stronger growth in mid 2015. The number of mergers and acquisitions are also showing some slowdown, with this having been a trend for the last 12-18 months.

As real term growth has returned the impetus for acquisitional expansion has faded slightly, though MTW expect M&A activity to remain strong in 2015 and 2016 as efficiencies of scale are sought by FM providers as pricing pressure remains high in the volume end of the market.

Rather than increase M&A activity, the research found that strategic partnerships with specialist FM contractors are becoming increasingly popular mechanisms for FM providers to offer a broader range of services to their clients. The report explores some of these issues and concludes that some providers are repositioning their offer to reflect their core values – generally either hard or soft FM, with the term ‘Total Facilities Management’ increasingly having a somewhat negative connotation.

Assessing likely future directions for the FM market, the report finds that FM providers are focussing on closer, strategic integration into client organisations. MTW’s director Mark Waddy commented, “Historically, the FM market has focused on the outsourcing of clients’ non-core services. Moving forward FM providers are increasingly seeking to develop into areas where they can assist their clients’ core business activities and therein lie many opportunities for revenue and margin growth.”

The 200 page report also identifies a large number of other opportunities which the FM market is exploiting in 2015. One such example is the growth in a ‘consumer retail mentality’, with FM providers not only considering the client’s needs, but also more
closely analysing the end users’ requirements and viewing them as consumers. This enables FM contractors to identify new differentiation opportunities which provide greater protection to price competition and enhance client loyalty levels.

MTW’s research found that more than 70% of UK FM providers currently have either a ‘good’ or excellent’ credit rating, reflecting a sustained trend of upward movement in recent years. This is also boosting greater optimism for product and service suppliers to FM companies who are now benefiting from rising levels of investment.

MTW forecast that FM providers’ capital expenditure levels will return to pre-recessionary levels by 2016, reflecting good news for suppliers to the FM providers. The report provides a comprehensive review of the UK FM market in 2015, forecasts to 2019 with product and end use sector shares alongside 3 year financial analysis for 100 key FM contractors.

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