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UK FM market research: outsourcing is set to outperform the UK economy in 2020

A new report on the UK Facilities Management market from MTW Research concludes that outsourcing is set to outperform the UK economy in 2020, with 85 per cent of FM contractors having healthy finances despite the Covid-19 pandemic.

Based on data from 80 per cent of the FM market, the report forecasts a return to pre Covid-19 sales faster than initially expected, with revenue exceeding 2019 levels by H2 2022 with a 10 per cent sales boost. MTW identify key changes in the FM market due to coronavirus, highlighting a “paradigm shift in the outsourcing market in 2020 as the FM market refocuses and rebalances”.

Analysing the impact of Brexit on the FM market, MTW found that £3 billion of potential growth has been lost due to uncertainties impacting on recent and near term demand for outsourcing. However, MTW point to the rapid changes in market demand due to Covid-19 and £15 billion of growth by 2024, meaning that any impact of Brexit on the outsourcing market is unlikely to be tangible.

The Covid-19 pandemic resulted in total borrowing by the FM market rising by more than £5 billion in 2020, with industry liabilities now accounting for 46 per cent of total FM market sales according to MTW. Whilst revenues for many IFM / bundled service providers remained reasonably resilient in H1 2020, industry net worth plunged by more than 60 per ent. However, sources for the report identify this as a short term trend, with profitability set to rise by 24 per cent between 2020 and 2024.

MTW’s analysis found IFM / bundled outsourcing the best performing sector in 2020, with sales set to return to pre Covid-19 revenue levels by early 2022, outperforming the overall FM outsourcing market. This sector’s ability to rapidly adapt to the COVID-19 crisis presented several unique opportunities for the IFM sector and associated suppliers.

MTW’s Director Mark Waddy commented: “The FM outsourcing industry can be characterised as a two-tier market in 2020. Sales briefly dipped below £100 billion for the first time since 2016 though this contraction was not borne evenly by all FM companies. There are new, fundamental opportunities for growth in 2020 though the number of pitfalls have also increased.”

Based on £90 billion of sales data, the report includes sales by outsourcing type and customer segment in 2020, with some seismic shifts in shares highlighted as a result of the Covid pandemic. The report also identifies longer term trends, with MTW pointing to services such as contract cleaning, security and IFM experiencing growth in excess of 16 per cent over the review period; whilst health, education and retail outsourcing sales reached a total value of more than £33 billion in 2020. The best performing sector to 2021 is attributed to tech/comms outsourcing, increasing sales by almost 40 per cent according to MTW.

The report profiles and ranks 100+ leading FM companies whilst also identifying recent mergers and acquisitions. Whilst M&A activity has slowed, fundamental shifts in FM market trends present unprecedented challenges in 2020 sustaining acquisitive behaviour. Changes in working practices and retailing; attitudes to leisure and health; and rising expectations in data driven environments are just some examples given by MTW which are generating both opportunities and threats for the FM outsourcing market in 2020 and beyond.

The report is available to purchase from MTW Research’s website www.marketresearchreports.co.uk.

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