have been predicted. Companies that are a ected will probably need
to look at ways to recoup this money, however. For new contracts and
those being negotiated now, it is vital that companies seek to include
clauses that o er them protection from the uncertainty of Brexit and
protect themselves from open-ended cost increases.
In conclusion, the FM industry is o en a key target for cost reduction
during times of economic uncertainty. I think we need to brace
ourselves for more contracts being re-negotiated and downwards
pressure on pricing. This can be seen as an opportunity, although my
experience is that during these times projects and investment are put
on hold. Whatever the outcome of Brexit, I think we are in for some
challenging times.
THE BENCHMARKING EXPERT’S VIEW
MIKE BOXALL, MD, SITEMARK
Leave or remain, very few would
argue that the negotiations have
panned out well. As a result of this
mishandling, we have been le
in a state of paralysis, with a deal
unlikely to pass through parliament
on one side and the undoubtedly
damaging prospect of a clean
break with the EU on the other.
It’s sobering to think that we are
now just over a month away from
the deadline with little progress or
breakthrough in sight. Despite this,
the FM market, like many others,
has responded bullishly. Perhaps this gives us some indication of how
the sector will perform once a formal exit is made, or instead shows
that no one can really know the true extent of Brexit’s impact until its
actually happened. Either way, uncertainty is seldom good for business
and most now would welcome some clarity.
As a benchmarking business the direct implications of Brexit are less
pronounced when compared to, say, a service provider who will be
in the firing line when a reduction in costs is required. That said, the
past two years has given us solid insight into our clients’ most pressing
Brexit-related concerns. With good reason, labour most o en sits at
the top of the list, both in terms of cost and access. For those that
employ large numbers of migrant works – which is virtually every FM
organisation irrespective of whether it o ers hard or so services – a
restriction on the movement of free labour will inevitably result in
wage inflation and other rising costs. For a sector that already sees a
large portion of its overheads spent on labour, this knock-on e ect will
be really troublesome. While this is already widely known among the
industry, it’s worth restating as even with a points-based immigration
system costs will continue to rise. This of course leaves aside the issue
of a weaker pound and the possibility of tari s on imported equipment
and consumables. Ultimately, Brexit is going to cost everyone more
money in the short term, be it directly or indirectly.
Perhaps a less discussed topic for the industry is the issue of
legislation for public procurement which is currently estimated to
represent almost 20 per cent of UK GDP. As it stands, everything must
be advertised in the O icial Journal of the European Union in order
to give every member state organisation an equal opportunity to bid.
Although UK procurement legislation arises from EU Directives, it has
been implemented into UK law through UK Regulations, so any change
is going to be long term. Public sector clients will continue using the
current process, albeit having to register contract award and notices in a
UK journal instead of OJEU in the event of ‘no deal’.
While intended to be transparent and non-discriminatory, EU
22 MARCH 2019
procurement rules are generally seen as being long-winded,
complicated and litigious. In addition, they require a level of expertise
that is becoming less prevalent in many sectors such as local authority,
housing and education. The Public Contract Regulations 2015 did
simplify the procurement process and helped boost the success rate of
SME businesses but, longer term, there could be much greater freedom
over procurement rules to ensure that contracts are awarded with a
much greater weighting on previous performance and best value, rather
than just a competitive process of lowest cost.
THE CLEANING FIRM’S VIEW
TIM DEEKER-HARRIS,
BUSINESS DEVELOPMENT AT PRIME CLEAN
With Brexit around the corner
(although the actual distance to
that corner seems to be forever
debated) I real have concerns over
the service industry as a whole
and where it will leave the largest
proportion of our workforce.
Wherever we go, the service
sector is made up from hardworking
foreign labour who work
the hours that so many Brits
simply won’t do. Many of these
workers have le their families
back home to come over to the UK
for a “better chance of employment”. This workforce is the backbone to
our businesses and what message are we delivering through voting to
exit Europe? The stats show that Brexit was predominantly supported
by people who are nearing retirement, or already retired, and whom
may not have to worry about the longer-term impact this decision is
likely to have on our country.
From my own perspective I have concerns for our industry. Not to
begin with, as I am sure the scaremongering of a hard Brexit simply will
not come to fruition... thank goodness. However, I worry for the medium
to long term and what will become of the majority of our workforce. Will
foreign nationals still want to reside in a country that voted for greater
border controls? Will we still be an attractive option for low skilled
workers? I am sure the industries that attract top talent and pay high
wages, for example banks and insurance companies, will not su er from
a loss of skilled foreign workers but I do fear for the low skilled worker
who make up our country's service industry. This is much broader than
just cleaning; who is going serve food in restaurants? Drive our buses?
Stock the supermarket shelves? The list is almost endless!
Direct labour costs are extremely likely to rise if the pool of workers
was to lessen. Furthermore, the cost to buy materials and equipment is
also likely to rise due to increased wage costs within other sectors. This
can only lead to one of two things, reduced profits or price increases.
Now we all know that approaching a client mid-contract and asking
for above inflationary increases can leave people in di icult situations.
Not all clients will be able to support this outright and may need hours
to be cut in order to allow for the increased rates of pay. This in turn
has a negative impact on the quality of work and in essence the client
satisfaction. Pull all this into the equation and you may find the length
of cleaning services contracts shortening due to the challenge of
balancing service levels with increased wage costs.
Do you have a question that you’d like
answered by the FMJ Clinic?
Email: sara.bean@kpmmedia.co.uk
FM CLINIC
Mike Boxall Tim Deeker-Harris
ADVICE & OPINION
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