The UK Facilities Management market is set to reach a value of GBP28 billion in 2008, according to MTW Research, with the market continuing to experience growth against a backdrop of a worsening economic climate.

The findings from the new report based on company sales, highlight an industry which has continued to benefit from a growth in outsourcing and has experienced positive performance in recent years.  Annual growth for the market is recorded at between 6-8% since 2004, reflecting a generally buoyant sector with demand derived from a broad spectrum of key end use sectors within public and private markets. 

The current contraction in the UK economy and the ongoing impact on business confidence is now indicated to be dampening the facilities management sector in late 2008, as new commercial construction and RMI projects in particular are postponed.  Whilst there remains some optimism in the market derived from public sector spending, particularly health and education, the impact of the government’s GBP 37 billion bail out of the UK’s three largest banks in October 2008 is likely to result in a decline in public expenditure in the medium term, with a subsequent negative impact on demand for FM services.  Nevertheless, the report forecasts some growth in the market in the short term, albeit at relatively low levels in 2009 and 2010, before a return to stronger growth in 2011. 

According to MTW, the implications for companies targeting FM companies are clear, with the credit crisis compounding growing pricing pressure in the market in the short term.  The findings also point to the likelihood of a relatively fast paced rise in borrowing in the industry, with debt rising to more than 60% of sales by 2009, further exacerbating the issue of price sensitivity in terms of purchasing by the FM companies.  These, and other issues suggest a more complex trading environment for manufacturers, contractors and suppliers to the FM industry in the short term and highlight the need for a clear and coherent strategy with which to weather the coming financial difficulties. 

During the last 12 months, MTW Research found that 47% of the FM industry experienced growth in sales revenue, although those companies reporting growth in 2008 experienced substantially lower sales than in 2007, reflecting a downturn in volume demand, and expectations are that the number of companies reporting static sales will increase substantially in the short term.  The report highlights the mixed scenario in terms of trading conditions in the FM market at present, with sales increasingly reliant on a decreasing number of larger companies in the industry, with those more able to service public sector applications now indicated to be primarily supporting market growth.