In FMJ's regular monthly column, our team of FM experts answer your
questions about the world of facilities management
THE FM ENTREPRENEUR’S VIEW
ANDREW HULBERT,
MD, PARETO FM
The underlying concerns around
a “no deal” Brexit relate to labour
supply and costs, supply chain
logistics, research & development
funding, FDI investment, trade tari s
and uncertainty. But what does this
all mean for the FM sector?
A change to the labour market
conditions will see suppliers
potentially struggle to attract labour
and therefore be forced to o er
higher salaries to attract the required calibre of workforce. The
reduction in labour supply and subsequent increase in wages will
result in higher costs to suppliers. This will put financial strain on
suppliers who already operate on relatively low EBITDA levels.
The new challenge to suppliers here is o„ en when low wage
labour costs increase (e.g. national living wage goes up) they
pass the costs on to their clients as the increase was outside
of their control. However, clients are less likely to be
sympathetic to a price hike as a result of a change in
labour market conditions. The opportunity here
is for good FM suppliers to work hard to retain
their high performing sta , which will gain them
a competitive advantage, as their industry
counterparts struggle to fill new roles. It
should be noted that EU-born workers are over
represented in the least skilled occupations,
directly impacting on the facilities sector.
The impact on the supply chain is one of the
greatest concerns to the FM sector as supply of
goods is fundamental to the delivery of FM services.
The impacts here are vast and wide ranging. There is
potential for supply issues with chemicals, consumables,
materials and food, as well as electrical or mechanical
components. All will bring strain to the delivery of services as
20 MARCH 2019
well as strain between the client
and contractor, as contractors
struggle to deliver items that they
previously had no problems with.
The opportunity for proactive FM
suppliers here is to buy, in-bulk,
important goods required for services
to their clients and be the ‘heroes’
when they can provide goods that no
other contractor can.
The uncertainty in UK plc, the drop in FDI
investment and reduction of academic research
funding all coupled with rising tari s for imports and
exports paint a bleak picture for the clients to FM contractors. This
uncertainty may lead to important clients moving their o ices
from the UK or looking to significantly reduce their costs. This is
both an opportunity and threat for the FM sector. The opportunity
is that many services contracts will re-tender which creates
opportunity but will also potentially drive down prices. The threat
is contractors begin ‘buying’ contracts at unmanageably low
margins and a further Carillion-style scenario becomes the norm
amongst contractors. The other opportunity is the government
are creating new service contracts to o set the potential risks of
a “no deal” exit. Some of the more entrepreneurial FM service
providers may be able to serve the government via these new
contracts.
To summarise, Brexit, in whatever form, will bring disruption
to UK plc that will be directly felt by the FM sector. With Brexit
comes great risk, but also great opportunity for FM contractors.
Those providers who can be entrepreneurial now may be able to
make significant gains on their competitors over the next three
years. In fact, this is a time when contractors can make or break
themselves, a great opportunity for all.
THE CONSULTANT’S VIEW
SATVIR BUNGAR MBE,
MD M&A ADVISORY AND HEAD OF FACILITIES
SECTOR M&A BDO LLP
As we await news from Theresa May
about her plans for leaving the EU, there
remains much uncertainty and concern
about what will happen. The global
economic picture continues to increase in
complexity and the UK facilities sector as
we have known it for decades is also likely
to transform.
Below are some considerations in the event of
a ‘no deal’ Brexit:
Labour and skills shortage – Recruitment will be
impacted as the industry employs a significant number of
EU workers across many skillsets. There could be much greater
FM CLINIC
We’re due to leave to
the EU at the end of
March and how we do
so is still very much
undetermined. What are
your greatest concerns
about the impact of Brexit
on your business and on the
wider FM sector, e.g. rising
labour costs; access to labour and
supply chain security?
Andrew Hulbert
ADVICE & OPINION
Brexit, in whatever form,
will bring disruption to UK plc
that will be directly felt by the FM
sector. With Brexit comes great
risk, but also great opportunity
for FM contractors.”
– Andrew Hulbert