Facilities management is big business in the UK — firms that don’t employ their own skilled teams often rely on multi-skilled contractors to keep offices and storage facilities compliant with safety regulations and provide food, accommodation and other support services.
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The current political and economic climate makes continual growth for established firms difficult but also offers opportunities for new players in the market.
With that in mind, here are 2018’s challenges and opportunities for the facilities management sector.
A recent EY report predicted that competition, cost inflation and Brexit labour market uncertainties mean that profit margins for most facilities management firms have remained stagnant for the past three years, despite revenues increasing.
14 per cent of labour in food and accommodation services and nine per cent in support and administration were born in the EEA. And with Brexit making the status of these workers uncertain, retention rates may drop, while strict immigration rules for non-EU citizens mean they’re not a reliable source for future recruitment.
Larger players in the industry say that the 2016 introduction of the National Living Wage and competition from smaller firms have also affected margins.
BIFM, the national body for facilities management, has offered to assist the government in the aftermath of the collapse of major public sector contractor Carillion.
It acknowledges that most of Carillion’s loss making contracts did not concern facilities management — but points out that the firm’s demise emphasises the inherent risks of operating with low margins and relying on a small number of large-scale contractors.
Moving forward, BIFM advises the government to change buying patterns and open up procurement systems to smaller specialist firms.
It has offered free training for facilities managers in ‘smart’ procurement techniques like collaborative outsourcing and contract management.
Simpler SME contracts
The process of tendering for government contracts is notoriously complex and the effect is that completing tender documents effectively requires a level of expertise and expense that only larger contractors can afford.
But the Government Legal Department (GLD) has spent the past year reducing the Crown Commercial Service (CCS) contract by 50,000 words — creating a user-friendly format that makes it easier for SMEs to compete in a framework worth £12 billion.
Contracts will be modular and written in Plain English, making it much simpler for government departments and their contractors to understand roles and responsibilities.
So in the future, a smaller facilities contract could be secured by a niche firm like London Drainage rather than a behemoth like Carillion — reducing risk to government and tapping into specialist expertise rather than relying on a generalist approach.
Tech-enabled facilities management
Smart building technologies and automated facilities management systems are increasingly being adopted on higher education campuses in the US, in an effort to reduce costs and increase efficiency.
Tech-enabled facilities management allows universities to lower energy usage ensure equipment lasts as long as possible and reduce maintenance costs.
Digital systems can produce detailed data on the performance of individual pieces of kit like air conditioning units and even help to plan the most effective use of teaching spaces.
More investment in these types of systems might be bad news for outsourced contractors in the long term, but it will help institutions make vital savings.
So it looks like 2018 will be a challenging year for large facilities management providers, but smaller specialist firms could become more prominent.
Do you work in facilities management? Share your thoughts on the industry in the comments section.