Published: September 2012
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About this report
In this market report we review the UK integrated facilities management (IFM) industry. We quantify the market size and historical growth rates while reviewing key factors behind these figures and exploring drivers of profitability.
We also carry out an in-depth analysis of the relevant drivers of industry growth – including relevant macroeconomic indicators such as GDP growth and employment levels, and other specific factors, like construction spending, PFI projects and numbers of people in schools and hospitals, which determine demand for IFM – setting out historical trends and forecasts.
What are the objectives of this market report?
The FM industry has been one of the leaders in the UK’s outsourcing revolution but its prospects have been clouded by recent, less certain, economic conditions.
We believe that, in order for those involved in the market to make the best decisions in this complex and changing environment, they need to have access to the best information and understanding of the trends and drivers. The aim of this market report is to provide this.
It is intended for facilities management service providers themselves as well as investors, banks, analysts, consultants and other parties with interests in the sector.
What are the sources and methodology?
This market report is based on:
– Financial analysis of the accounts of companies in the industry
– Interviews with senior-level contacts in the market
– In-depth analysis of the macroeconomic environment and relevant market drivers
– Our own experience of advising both companies and investors in the industry
Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions
The Integrated FM Services Market – 6
Market size and growth – 15
International comparisons Market size and growth
Market size & growth
Market price and productivity trends
Market drivers – 21
Discussion of market drivers
Drivers and their impact
Competitive landscape – 29
Profiles of the main competitors
Forecasts – 52
Key drivers forecast
Risks to the forecast
Appendix – 67
List of figures UK Integrated Facilities Management Market Report
1. 2012 FM contracts awarded by type of service
2. 2012 FM contracts value by type of service
3. 2012 FM contracts awarded: single vs. multi-service
4. 2012 FM contracts awarded by sector
5. Density of residential starts in England / dwellings per hectare
6. IFM market size as a % of GDP
7. Outsourced FM market /£bn. + IFM as a percentage of the market
8. Revenue of leading UK FM providers
9. Facilities management services: single vs. multi service / £bn.
10. IFM market value / £bn.
11. Gross and pre-tax margins for the set of leading operators / %
12. Leading FM service providers: revenue per employee / £’000
13. Have you achieved a salary increase over the past 12 months?
14. UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP / % annual changes
15. UK Inflation: Consumer price index and GDP deflator / % annual change
16. UK employment / annual % change
17. UK construction spending by type / £bn.
18. Number of PFI projects closed by year
19. Pupils in state-funded schools / ’000 and % change from previous year
20. UK students in higher education / ’000
21. Hospital beds occupied / ’000 and % change from previous year
22. UK residential care beds / ’000
23. Length (percentages)
24. Historical performance of leading players
25. SERCO Group plc. summary financials for UK divisions
26. Compass UK & Ireland Ltd summary financials
27. MITIE Group PLC summary financials
28. Amey UK plc. summary financials
29. Vinci Construction UK Limited summary financials
30. Sodexo Ltd summary financials
31. Babcock International Group (support services division) summary financials
32. ISS Facility Services Limited summary financials
33. Imtech UK Ltd. summary financials
34. OCS Group UK Limited summary financials
35. Balfour Beatty Workplace summary financials
36. Interserve plc. summary financials
37. Aramark Ltd summary financials
38. SPIE Matthew Hall Limited summary financials
39. Emcor UK Facilities Services (EFS) summary financials
40. Integral UK Limited summary financials
41. Capita Symonds Ltd. summary financials
42. G4s Integrated Services (UK) Limited summary financials
43. UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP / % annual changes. Historical and OBR March 2012 forecast
44. UK Consumer Price Index and GDP deflator / % annual change. Historical and OBR 45. Autumn 2011 forecast
46. UK employment / annual % change
47. UK construction spending: historical and forecast / £bn.
48. Outsourced FM market /£bn. + forecasts until 2016
49. IFM market overall and as a % of outsourced FM + forecasts until 2016
The IFM market
Integrated facilities management (IFM) has developed as an important industry in the UK over the last couple of decades
We estimate its size to be in excess of £8bn meaning it now accounts for around a third of the total outsourced FM services market.
- Its significantly higher growth rate means this proportion has increased through time and we expect it to continue to do so.
- Penetration varies significantly by sector with those felt to be strategically important or more complex (eg catering, security and more technical hard FM areas) least likely to be incorporated in IFM arrangements
The UK markets – both for IFM and outsourced FM services – are significantly more mature than elsewhere in Europe.
- Evidence suggests that, relative to GDP, the UK market is at least twice as large as the next most developed markets: Sweden and the Netherlands.
- Other markets offer higher growth and that, rather than a major switch to international buying, has led many leading UK operators to focus on overseas markets
The market remains fragmented. In our research we have analysed the performance of 33 of the largest UK FM service providers with IFM capability but the list is not exhaustive.
The market has consolidated and we expect it to do so further in future. This is being driven both by
- Acquisition – with the leading groups such as MITIE, Compass, Carillion, Capita, Vinci and Imtech buying up single service providers to extend their capabilities and bolster their IFM credentials while also gaining entry to new customers
- Organically, as the increasing size of IFM contracts means that fewer providers have the necessary scale to service them.
Smaller single-service providers face the threat of being forced to accept second-tier supplier status where they are vulnerable to the bulk-buying power of the leading IFMs.
Despite the recession, industry margins have held up very well as providers have been able to achieve inflationary price increases while increasing productivity and, in many cases, imposing wage freezes on their workforces.
- To an extent, the shift from single service to IFM explains this, with price premiums being possible where the customer sees greater value from a single point of contact and potential gains from reengineering or sharing costs between multiple services performed for the same client.
- Nevertheless, as IFM itself matures as a service, margin pressure may increase.
In the current economic environment with little or no economic growth, delayed recovery and decreasing construction spending, demand from the private sector appears flat.
Despite uncertainty surrounding PFI, there are causes for optimism regarding the public sector
- Positive demand fundamentals such as the demand for schools places and hospital / care home beds
- Bold outsourcing strategies are currently considered by many observers to be necessary for government spending reductions to be achieved.
However, we believe there is considerable execution risk involved in such a significant change as many in the industry envisage.
- There are signs of dissatisfaction from existing customers with the IFM model and evidence of intentions on the part of some to bring certain services, where the IFM provider is not seen to be adding sufficient value to justify its margin, back in-house.
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Integrated Facilities Management: market insight