Facilities Management Outsourcing - Health and Education Sector - 5 Key Facts

• The market value for outsourced integrated services and TFM in health and education is expected to grow by 17% through to 2022.
• The penetration of bundled and TFM outsourcing within healthcare is estimated at around 25%, with outsourcing generally higher for 'soft' services.
• The Primary education market accounts for 52% of services costs in the education market.
• Building maintenance and improvement accounts for a significant portion of FM expenditure in education, representing 25-30% of the overall market.
• Bundled services in the Mental Health & Learning Trusts represent 20% of the total service provision.

These facts have been extracted from AMA Research's 'Facilities Management Outsourcing – Health and Education Sector Report - UK 2018-2022' available for purchase now. 

Highway Maintenance Market - 5 Key Facts

• The UK highways maintenance market is valued at more than £10bn.
• Expenditure on roads infrastructure fell by almost 39% in 2016.
• In 2017, production of hot and warm mix asphalt is estimated to have reached 24m tonnes.
• Production of hot and warm mix asphalt is forecast to reach 25m tonnes by 2020.
• At present, there are thought to be between 7-8 million street lights in the UK, and over 1 million of them are over 40 years old.

These facts have been extracted from AMA Research's 'Highway Maintenance Market Report - UK 2017-2021 Analysis' available for purchase now. 

Contract Cleaning Market - 5 Key Facts

• Cleaning and hygiene services often form part of a total facilities management contract, typically comprising around 12-15% of the total contract value.
• Contract cleaning is estimated to account for around 70% of the total UK market for cleaning services in 2016.
• The commercial sector, particularly offices, remain a key end use sector in the cleaning market with a share of 43%.
• Nearly 90% of the firms competing in the industry employ less than 10 individuals.
• Market estimates indicate that contract cleaners account for the bulk of cleaning equipment sales, estimated at around 75% of the market.

These facts have been extracted from AMA Research's 'Contract Cleaning Market Report - UK 2017-2021 Analysis' available for purchase now. 

UK Highway Maintenance market worth more than £10bn in 2017

The UK highways maintenance market is valued at more than £10bn, and makes up a major part of UK infrastructure spending. Expenditure by Highways England accounts for around a third of the market, while expenditure by Local Authorities in England on highways and transport in 2016/17 was approximately £4.4 billion. Structural maintenance accounts for a significant proportion of capital expenditure on roads by local authorities.

The Government has committed to major spending and investment programmes in the road network, driven by factors such as increased road congestion, rising population levels and deterioration of roads by adverse winter weather. Subsequently, the roads sector has been one of the market’s fastest growing in terms of expenditure in recent years. Major target areas include manufacture and application of bitumen macadam, and asphalt and bitumen emulsion, manufacture and application of surface dressing, aggregates for macadam and surface dressing, special surface solutions, road markings, reinstatement products, road studs and winter maintenance treatments.

Funding for Highways England is determined every five years via a Road Investment Strategy (RIS) set down by the Department for Transport. Through RIS 1, it aims to invest around £15bn in England’s road network over the 2015-2020 period, covering over 100 major schemes. In addition, the Pothole Action Fund is worth around £250m at present.

Within the last financial year, the Scottish Government budgeted more than £820m for expenditure on the country’s motorways and trunk roads, an increase of more than 18% compared to the previous year, while the Welsh Government’s 2016/2017 budget spent almost £52m on motorway and trunk road operations, with an additional £108.7m allocated for improvement and maintenance activities.

Private sector involvement in highways maintenance has steadily increased with around 50% of UK authorities now thought to use term maintenance contracts, many of which are 5-10 years in length, with some even longer. There has been an increase in major contractor involvement in this market with companies such as Kier, Amey, Tarmac, LafargeHolcim and Balfour Beatty taking many of the largest highways maintenance contracts. There have also been several mergers and acquisitions in the sector, and it is anticipated that other traditional construction companies will enter this market in future.

Going forward, investment in road construction and maintenance is projected to increase over the short to medium term, unless the UK economy suffers a major contraction. The Government also continues to explore ways of bringing more private capital into road building.

There are likely to be changes in the way certain highways are maintained. The next decade or so is likely to witness greater impact of technological advancements and ‘smart’ systems, as well as more consideration given to the environmental impact of highways maintenance projects. Changes in the way maintenance contracts are introduced are also expected.

“Environmental and sustainability considerations are likely to play a greater role in future highways management and some of the products which now feature in road and highways maintenance have been created with these criteria in mind” said Hayley Thornley, Research Manager at AMA Research. “Examples include photovoltaic road surfacing and solar-powered road studs, greater use of natural and recycled materials and/or aggregates and micro-foamed asphalt which lowers carbon dioxide emissions.”

The UK road network of the future is likely to include more smart motorways, and currently 10 smart motorways are planned for construction. Demand is also likely to continue rising for products which can help to reduce the time spent on site and therefore minimise disruption to road users.

The ‘HighwayMaintenance Market Report – UK 2017-2021 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services with over 25 years’ experience within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Technology and sustainability key drivers of the UK Contract Cleaning market

Following three years of marginal growth, the UK contract cleaning market accelerated between 2014 and 2016 in line with the economy. Uncertainty caused by factors such as Brexit mean that this market growth is unlikely to be sustained over the next few years. Looking forward, demand is likely to be relatively buoyant in the transport sector, while the retail, commercial offices and the government sectors are likely to provide fewer opportunities, at least in the short term.

Contract cleaning is a mature market covering both single and multi-service contracts, in the commercial, manufacturing, healthcare, retail, transport, local authority and central government sectors. There has been an underlying trend towards greater levels of outsourcing over the last decade which has driven demand for the contracting out of cleaning services. Cleaning and hygiene services often form part of a total facilities management contract, typically comprising around 12-15% of the contract value.     

Despite over 40,000 businesses operating in the cleaning industry, the market for contractors is dominated by a relatively small number of large IFS/IFM and multi service providers and large and medium sized specialist cleaning contractors. There is also a significant franchise sector in the market, as cleaning remains one of the most popular franchise opportunities, offering a relatively low-cost investment, in a robust market with relatively few barriers to entry.

Fiona Watts of AMA Research said: ”Cleaning is one of the most competitive of all contracted-out sectors, and profit margins are under significant pressure due to rising labour costs and increasing raw material and equipment costs. In addition, there is pressure on the cleaning industry to improve standards, particularly in the healthcare sector, while also increasing efficiency.”

The drive towards more sustainable cleaning practices has become an important issue within the industry, with clients demanding more sustainable practices from contract cleaning companies.

The market is also embracing the use of technology, which is driving advances in performance and efficiency. For example, the first fully automated robotic floor cleaning machines have been launched in the UK and robots using UV lights to kill the DNA of bugs have been trialled in the NHS to help fight HCAI’s. Other technological developments include increased connectivity, which allows contractors to digitise cleaning procedures using sensors, gather and analyse real-time data to help them work smarter, create efficiencies and raise standards. Technology is expected to become ever more present within the industry over the coming years.

Looking forward, moderate growth is expected to continue within the contract cleaning market with a mix of negative and positive factors impacting the market. The demand for bundled service and Total Facilities Management contracts will continue to be a strong driving force as public and private sectors look to maximise value from contracts. However, there is concern that the Brexit decision may have an impact on the labour market and, with labour costs accounting for an estimated 80% of any invoice within the contract cleaning market, changes such as an increase to the National Minimum Wage have a significant impact on the health of the sector.

The transport sector is forecast to show good growth, driven by the expanding UK aviation and rail infrastructure and growing passenger numbers, something which should have a positive impact on the contract cleaning industry. Demand in many sectors are expected to decline in the coming years, such as the retail sector and the commercial office sector where reduced development activity will limit new contract cleaning opportunities in the short term.

The ‘Contract Cleaning Market Report – UK 2017-2021 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services with over 25 years’ experience in the construction and home improvement markets.  The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Growth of 24% in the UK mechanical & electrical contracting sector since 2012

The UK market for mechanical and electrical (M&E) contracting has increased by almost 25% since 2012, following a period of sustained growth from 2013 onwards, driven by a buoyant new build market, with rising output in the office and infrastructure sectors in particular. This growth continued in 2016, when the market saw growth of 4%, despite continued constrained public sector capital spending. In 2017, growth is forecast to stagnate, as construction output becomes more subdued.

Many factors support a continuation of market growth, including the development of higher specification and more complex products, changes to legislation requiring the specification of higher value products, greater use of controls and energy efficient products, continued strength in data centre construction as well as greater levels of outsourcing of M&E services.

“A key area of growth has been installations aimed at improving energy efficiency and reducing carbon emissions, driven by legislative requirements and building regulations.” said Fiona Watts, Editor at AMA Research. “There has been a rapid expansion in the range of LED lighting and increasingly sophisticated control systems for heating, lighting, and energy management, therefore this is a growth area that many contractors have been looking to exploit.”

However, several factors are negatively impacting the market at present, such as public sector budget constraints, uncertainty over the impact of Brexit and greater use of off-site manufactured panels and modules.

The M&E market is fragmented, with the majority of market value accounted for by smaller operators with turnover of under £20 million, though consolidation activity amongst suppliers continues. There have been further strategic acquisitions in response to the growing focus on integrated services within the sector with contractors widening the range of services offered and examples of strategic joint ventures to secure work on very large-scale projects.

In terms of market prospects, the M&E sector is heavily dependent on the performance of the non-residential construction industry. Non-residential construction output is facing subdued growth into the medium term. Furthermore, new non-residential work remains highly susceptible to changes in levels of business confidence with the private commercial sector being particularly vulnerable to changes in speculative development programmes. 

The current uncertain economic climate and falling levels of business confidence relating to Brexit and other issues is likely to halt growth within the M&E contracting sector within the short term, although there are positive influences on market value that will underpin growth to some extent, including a relatively stable RMI sector and increasing prices of imported products. Output within the office and education sectors, which accounted for over 45% of the M&E market in 2016, is expected to decline until 2018. Overall, it is estimated that the market will remain flat through to 2018, then return to growth from 2019 onwards but at a modest rate of 1-2% per annum.

The ‘Mechanical and Electrical Contractors Market Report – UK 2017-2021 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services with over 25 years’ experience in the construction and home improvement markets.  The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

UK Electrical Contracting market worth over £20bn in 2016

The electrical contractors market was worth just over £20bn in 2016, according to estimates by market research firm AMA Research. The value of the market grew strongly from 2014 to 2015 in line with the general resurgence in overall construction output, in particular the infrastructure and offices sectors, and to a lesser extent in new build housing. The estimates for 2016 are more moderate, with growth of around 1%.

Electrical contracting was less affected than some other areas within construction during the short-term dip in the construction market in 2012. This was partly due to the fact that the market covers a wide range of end use sectors and has a high proportion of work in RMI, insulating it somewhat from the effects of downturns in new building activity.

A key area of growth in recent years has been installations aimed at improving energy efficiency and reducing carbon emissions, driven by legislative requirements and building regulations. There has been a rapid expansion in the range of LED lighting products on the market, and with increasingly sophisticated control systems for both heating and lighting, this has been the major growth area in demand for electrical products.

“Profit margins, which had been significantly squeezed, have shown some signs of recovery from 2014 onwards, suggesting that the practice of submitting tenders at, or below, cost price in order to secure work may be dropping off” said Fiona Watts of AMA Research. “However, some firms continue to make losses while loss making contracts are completed.”

Competition remains fierce among contractors, with some larger players continuing to seek growth, gain access to new markets and expand the range of services they offer, through acquisitions. There has been an increase in the entry of small businesses into the market, which, in light of falling levels of employment overall, may indicate that some workers in the sector who were previously employees have opted to become self-employed.

Future prospects for the sector are moderately positive, with the electrical contracting market expected to show growth of around 2-3% per annum over the next few years. This depends largely on the performance of the non-domestic and domestic construction sectors, but business confidence remains good among electrical contractors, despite the uncertainty around a likely Brexit within the next 2-4 years.

Growth in the future is also likely to be motivated by legislation around carbon reduction, and renewable energy in particular, with a shift to LED lighting, increased modular product usage and greater use of controls which will have a positive impact on the market.

The ‘Electrical Contractors Market Report – UK 2017-2021 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services with over 25 years’ experience in the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Contract Cleaning Market - Key Facts

Did you know that...

1. The contract cleaning market is worth over £5billion.
2. Outsourced contract cleaning accounts for over 65% of the market.
3. Offices is the largest sector, but healthcare is a key sector accounting for around 12% of the market.
4. The commercial cleaning equipment, products and chemicals market is worth around £1 billion, with powered cleaning equipment accounting for around 30%.
5. Market prospects are for steady growth with the introduction of the living wage set to drive up contract prices.

These facts have been extracted from AMA Research's report 'Contract Cleaning Market Report - UK 2015-2019 Analysis', available from www.amaresearch.co.uk or by calling 01242 235724.

Continued low level growth expected for FM outsourcing in the UK central and local government sectors

The outsourced, bundled facilities management market in central and local government was estimated to have grown by around 3% in 2015. While the market had experienced good growth through to 2011, reflecting the move towards greater levels of outsourcing of a wider range of services and a high level of investment in facilities, it substantially declined in 2012 as government spending fell and the government estate underwent consolidation in order to manage national debt and improve carbon emissions, a trend which continued into 2014.

Factors supporting the market include increasing penetration within central and local government, a move towards a greater array of services being outsourced, and the need for government departments to achieve significant cost savings to meet tighter budget restraints, with the government encouraging greater use of the private sector partners to help achieve this. Nevertheless there remain sustained pressure on margins, reflecting consolidation in the market and greater numbers of larger FM contractors in the market. In addition the Government’s ongoing activity to reduce the size of their estate has continued to impact on contract opportunities both in the central Government sector and the local Government sector.

Social housing remains the largest end-use sector, accounting for around 44% of market value, followed by central government, with local government the smallest sector in this market. Service development is currently focused on niche areas such as energy management and sustainability as well as diversification into wider back office areas outside the scope of this report. These services tend to be high cost, although they will provide long term savings and strict government targets on cost, carbon reduction commitments etc. encourage development in this area.

While remaining under pressure, the market for FM in the central and local government sectors is expected to improve and grow by 3% in 2015 and continue to display positive growth through to 2019. This should be driven by improvement in the social housing sector, as housing associations and local authorities intend to improve their operational efficiencies and as decent home standards need to be maintained. There are also expected to be inflationary pressures from the introduction of a compulsory Living Wage in 2016, which will contribute towards higher growth. Continuously evolving legislation and EU standards is also resulting in a move towards tighter carbon and energy targets, which should provide a boost in demand for energy management services.

“Energy conservation is likely to continue to be a driving factor within the market, as significant energy costs and tight legislation will encourage organisations to look at reducing consumption through technological investment and improved energy management” said Keith Taylor, Director of AMA Research. ”The introduction of the National Living Wage in 2016 could see costs increase, with limited scope to pass these costs on within the public sector and with substantial wage increases from 2016-2020 across the low paid sector, some inflationary pressures are bound to result from this development.”

However, public sector cuts continue with cross-collaboration across departments and regions, as well as collaboration between central and local departments likely to impact on opportunities for FM contracting in this sector. Other factors negatively affecting this market include continuing low levels of public sector new construction, in particular in the social housing sector.

The ‘Facilities Management Outsourcing – Central and Local Government Sector Report – UK 2015-2019 Analysis’ is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

FM outsourcing in the UK corporate sector to grow by 7-8% per annum until 2019.

The market value for outsourced ‘bundled’ services and TFM within the corporate sector has seen some improvement in terms of number of contracts, driven by business confidence levels, a generally improved economy and good growth in the financial and service sector. This has led to reasonable growth in the market of 4-5% per annum. Nevertheless there remains sustained pressure on margins, reflecting consolidation in the market and greater numbers of larger FM contractors who are intent on ensuring they win enough business to satisfy their capacity.

Facilities outsourcing within the corporate market is also considered to be mature across most sectors, with around 75% of services by value thought to be outsourced in some way. Commercial offices and retail are approaching saturation point and as such, growth is largely reliant on expansion of these sectors.

Commercial offices represent the largest end use sector accounting for an estimated 52% of the market by value, followed by the retail sector. The leisure & entertainment sectors also account for a significant share. Certain sectors of the corporate FM industry are likely to offer greater opportunities than others, in particular the office sector in the south east is continuing to show good growth. The leisure sector is expected to continue growing though the retail sector remains under pressure from the growth of online sales. This seems likely to limit the opportunity for substantial new developments of larger scale retail parks, though it may create opportunities in the warehousing sector.

There is a shift from outsourcing an increasing number of non-core services to using FM providers as a much more integrated part of the company’s overall strategy. This more integrated approach links contracts to achieving company goals and these contracts tend to have a greater management element, thereby adding value. There are also likely to be a greater number of international contracts, favouring larger international providers. The FM market has experienced a number of mergers and acquisitions over the last few years, influenced by market maturity, as well as changes in the economic climate. This consolidation is likely to continue over the short term with tightening margins and a challenging economic environment.

There are expected to be inflationary pressures from the introduction of a compulsory Living Wage in 2016, perhaps squeezing the contractor margins, particularly in the public sector where budgets remain under pressure. In any event this is likely to create some inflation in the marketplace. Some of the growth forecast from 2016 onwards incorporates an impact from this change, with growth rates expected to increase to around 7-8% per annum until the end of the forecast period in 2019. However, there are greater pressures to create efficiencies through both cost and energy savings.

“The need to minimise operational costs and redundancies resulting in a reduction in workforces has seen many organisations reducing office space, and this is having a negative influence on the FM market as contract values are cut” said Keith Taylor, Director of AMA Research. “These cutbacks in FM contracts usually occur at the time of re-tendering but have also become more prevalent mid-contract, though pressures have been easing in the private sector as employment levels recover. However, the benefit of office rationalisation has seen a growth in use of niche services such as workspace management and move planning.”

In the longer term, as business confidence improves, it is expected that contracts will incorporate more services, increasing value through specialist skills and knowledge and cover longer periods as companies progressively move away from self-management of non-core services. Energy conservation is likely to continue to be a driving factor within the market.  Significant energy costs and tight legislation will encourage organisations to look at reducing consumption through technological investment and energy management.  While energy management forms part of most, larger FM contracts, the necessity to employ more complex technology and monitoring equipment is likely to enable FM providers to add value, strengthening the position of those providers with expertise in this area.

The ‘Facilities Management Outsourcing – Corporate Sector Market Report – UK 2015-2019 Analysis’ is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Plumbing Contractors Market Report - Key Facts

Did you know that...

1. Indications for 2015 are positive for plumbing contractors and it is hoped the market will achieve value growth of around 6% during the year.
2. London & the South East represents the largest market for plumbing contracting services, accounting for 28% of all installations by value.
3. The majority of revenue at 65% is generated by small local and regional companies. The largest contractors account for an estimates 10% of the total market.
4. Significant plumbing contractor business in the South West include Robert Heath Heating and ALHCO Group. F.P Hurley & Sons, APO Chant Plumbing & Heating and Shackleton & Wintle.
5. The volume of plumbing contractor businesses has dropped in Northern Ireland over the last 3 years, the only region to have experienced a fall in this period.

These facts have been extracted from AMA Research's report 'Plumbing Contractors Market Report - UK 2015-2019 Analysis', available from www.amaresearch.co.uk or by calling 01242 235724.

Merger and acquisition activity to continue in UK health and education FM sectors

The market value for outsourced integrated services and TFM in health and education has fallen during 2015 and is now estimated to be worth around £3.5bn. The potential of facilities management outsourcing in the health and education sectors has been limited since the beginning of the review period, as an increase in outsourcing has been offset by the decline in new large scale projects coming to the market, due to the cancellation of large scale capital expenditure programmes in 2010 and budget cuts introduced in 2012.

However, the underlying trend towards outsourcing an increasing array of services, including a gradual shift towards ‘bundled service’ and TFM contracts, has been a positive influence on growth, adding to contract values. This is likely to continue as efficiencies are sought in order to operate within ever tightening budgets, prompted further by a political focus on private sector involvement and greater levels of co-operation across regions and departments. Healthcare represents the largest sub-sector in this market, while FM outsourcing within the education sector is less well established.

The public health sector has undergone a period of restructuring which has limited the development of the FM market in this sector, and significant changes also came into effect in April 2013. However, the market is thought to have started to normalise from these effects and the scope for increased penetration nevertheless remains a positive influence, supported by the Government’s encouragement of more cross-regional co-operation in procurement. Energy conservation is also likely to remain a key driving factor within the FM market. 

The education sector had been expected to represent one of the most dynamic end use sectors for FM outsourcing, but is now likely to remain limited. The cancellation of Building Schools for the Future (BSF) and concern over the value of some long term PFI service contracts, coupled with the restriction on budgets, has seen new contracts decline and being renegotiated in order to bring down existing costs.

Merger and acquisition activity amongst FM providers has continued and there have also been a number of instances of business failures and market withdrawals. This has been influenced by market maturity, changes in procurement practices and moves by larger providers to expand services and geographic coverage. This trend towards consolidation is likely to continue over the medium term.

Energy conservation is likely to remain a key driving factor within the FM market. Volatile energy costs and legislation relating to carbon emissions and sustainability will encourage organisations to look at reducing consumption through energy management. While energy management already forms part of most FM contracts, the necessity to employ more complex technology and monitoring equipment is likely to enable FM providers to add value, with many providers expanding their provision in this sector.

“The announcement of a compulsory ‘Living Wage’ from 2016 is likely to result in inflationary pressures and resulting market growth as FM contractors pass on these increased labour costs” said Keith Taylor, Director of AMA Research. “Some absorption of the costs and erosion of margin seems likely, though the 36% rise in ‘Living Wage’ up to 2020 will probably be impossible to totally absorb.”

The outlook for the FM outsourcing market within healthcare and education is considered to be modest over the short to medium term, reflecting government focus on private sector involvement balanced by the need to work within restricted budgets. Focus on ‘Value for money’ continues to support the market in terms of outsourcing penetration, although it can limit individual contract values.

The ‘Facilities Management Outsourcing - Health and Education Market Report – UK 2015-2019 Analysis’ is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Margins remain under pressure in the UK Contract Cleaning market

The market for contract cleaning services in the UK has seen low level growth over the past two years and is now worth around £5.5 billion. Though the market was affected by the economic downturn, it has benefited from increased standards in cleanliness demanded by key areas such as health and food hygiene. Many contract cleaning companies have reported relatively steady growth with further modest growth forecast until 2019 reflecting ongoing recovery in the economy and rising costs.

Contract cleaning is a mature and highly fragmented market, despite the high level of merger and acquisition activity that seems to have become an ongoing characteristic, and is one of the most competitive of all the contracted-out sectors. Despite the difficult economic climate over the last 5 years - and continued cuts across budgets in both the private and public sectors - the market has performed reasonably well compared to the wider FM and construction industry. The ‘commercial’ market (offices, retail etc) is the largest sector with an estimated 43% value share, with local authority and health also representing key sectors.

The UK market for non-domestic cleaning products, including equipment, materials and chemicals, has been largely flat in recent years and only modest growth is forecast for the 2015-2019 period. Key trends in this sector include; increasing development of antibacterial products, in particular in the healthcare, food preparation and hospitality sectors, growth in the powered cleaning machine sector, greater focus on improving efficiency and increased automation of cleaning processes, increase in daytime cleaning. The market continues to be strongly driven by legislation and higher standards for cleanliness, hygiene and health and safety.

One of the major issues facing the industry is the recent announcement of the Government’s Living Wage, which means that over 25’s will receive an hourly wage rate of £7.20 per hour from April 2016 rising to over £9.00 per hour by 2020. While some of these costs will be absorbed, the rise is substantial and will have a major impact on the contract cleaning industry where average pay rates are low and labour costs represent a high proportion of contract prices. As a result, this will inevitably drive the market upwards and is also likely to drive growth in the equipment sector as larger employers look to increase productivity levels to offset higher labour costs.

The provision of ‘one-stop shop’ solutions and bundled services has become an increasingly more attractive option, particularly for larger clients. The economic downturn also increased pressure on companies to improve their operational efficiencies and control costs. It seems likely that demand for bundled services contracts will continue to be a strong driving force in the market over the next few years. It has already become a key factor behind the number of acquisitions of single service providers by FM companies, particularly into specialist sectors such as energy management.

In addition, the drive towards more sustainable cleaning practices is a growing issue across the contract cleaning industry, driven by demand from clients keen to ensure that their corporate responsibility towards the sustainability agenda is met. As a result, cleaning firms have introduced a range of new ‘green’ measures in order to meet this growing area of demand, including daytime cleaning and more energy-efficient cleaning equipment. Daytime cleaning is now becoming more popular where a high standard of cleanliness is required in areas such as healthcare and offices.

“Cleaning is one of the most competitive of all contracted-out sectors, with profit margins under constant pressure, though the cleaning and support services industry is generally accepted to be more ‘recession proof’ than other sectors.” said Andrew Hartley, Director of AMA research, “It is a highly labour intensive industry and the introduction of the Living Wage with incremental increases is bound to have an impact on the market in the medium term, probably leading to a combination of rising contract values, reduced margins and greater investment in powered cleaning equipment and daytime cleaning.”

The ‘Contract Cleaning Market Report – UK 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Private sector investment drives UK construction contractor growth

In 2014, contractors saw construction demand pick up and remain strong throughout the year, with positive growth rates for new work recorded in each successive month. Total non-domestic construction output in 2014 is estimated to have reached around £79.1bn, an increase of around 5% on the previous year.

The contracting industry has undergone a period of considerable change as construction was one of the hardest hit sectors in the UK economic downturn, with a substantial deterioration in output and activity levels. A decline in the supply of contracts forced many contractors to reduce the size of their businesses, cut costs and consider smaller sized contracts, with lower margins. With larger contractors bidding for smaller-scale and lower value work in order to maintain their pipelines, there has been intense competition with smaller, regional companies, who have struggled to compete.

Those firms that have done well, such as Amey, Carillion, Galliford Try and Interserve, all with a turnover in excess of £1bn, are all highly diversified and have large FM operations. Companies with a particular focus on the utilities sector have also done comparatively well, as have smaller, regional companies with a particular focus on sectors such as housing.

An increase in market activity has led to a rise in the levels of enquiries and requests by clients to submit tenders. However, this recent uplift in workload is putting particular pressure on main contractors who have had to secure work at low prices and many contractors are now struggling with capacity issues in order to meet increased output requirements. There is also a shortage of skilled tradesmen working in the sector, such as carpenters, joiners, glazing contractors and building services engineers. However, the upturn in workloads is providing specialist contractors with more secure workloads as main contractors improve conditions and payment periods in order to secure their services.

With forecasts indicating that non-domestic construction output will grow by around 5% in 2015, the outlook for the contracting industry remains good. The outlook for the short-medium term also indicates a steady recovery for key sectors such as offices, industrial and retail, though balanced by more muted performance from key public sectors such as health and education.

“Going forward, growth in the contracting industry is likely to be underpinned by investment by the private sector which will probably offset cuts in public spending – and also housebuilding is set to maintain steady underlying growth“ said Andrew Hartley, Director of AMA Research. “In addition, Government plans for infrastructure investment after 2015 will provide a significant boost to the construction industry, although this could be tempered by interest rate rises, material price increases, the availability and cost of labour, as well as tender prices.”

The ‘Construction Contractors Market Report – Focus on Sector Capability and Strategy – UK 2015-2019 Analysis’ is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Good growth forecast for plumbing contractors market in 2015

The plumbing contractors market was estimated to be valued at around £14.7bn in 2014, having seen good levels of growth over the last two years.

The plumbing contracting sector weathered the economic downturn fairly well compared with other construction sectors, due to the fact that a large share of work is made up of repair and maintenance, which is generally more resilient than work within the newbuild sector. In addition, plumbing installations cover a number of non-domestic sectors, in addition to housing, and some of these, in particular the public sectors, continued to perform relatively well into the recession due to continued government investment to support the construction industry.

The market experienced a slight improvement in 2010 and again in 2011, however, value was inflated by widespread material cost increases within some plumbing product sectors, particularly those related to copper. In addition, spending cuts within the public sector had started to come into effect and the value growth could not be sustained, leading to a decline in the plumbing contracting market during 2012. The situation was more positive in 2013 and while the economic situation remained relatively fragile, there were positive signs during 2014 - business confidence improved and construction activity increased sharply, particularly in the housing sector.

The key occupational roles across the plumbing contracting sector include general plumbing and bathroom installations (mostly domestic), gas installation and maintenance, refrigeration and air conditioning, and heating and ventilation. Employment in the plumbing and heating sector is expected to increase across England, Scotland and Wales. There are currently skills shortages for fully qualified plumbers, which should increase labour costs and support value growth across the contracting sector in the short to medium term.

Future prospects for the plumbing contracting market are relatively bright, providing the construction market in general continues to improve. Indications for 2015 are positive and it is hoped the market will achieve value growth of around 6% during the year. While the pace of growth is likely to have slowed by 2016/2017, it is expected that the plumbing contracting market will be worth £17.1bn by the end of the forecast period.

“Opportunities for growth are likely to be found in the new housing sector, which is currently being driven by rising prices, increased mortgage lending, as well as a growing uptake of the government’s ‘Help to Buy’ programme” said Keith Taylor, Director of AMA Research. “In the existing housing sector, the changes to the stamp duty levels along with growing consumer confidence and spending, should support increased RMI expenditure.”

It is likely that as the economy improves and consumer confidence grows, an increasing number of consumers will begin to focus on higher value, big ticket projects such as kitchens and bathrooms. This is perhaps already the case in London and the south east and other areas which have experienced high property value growth. Other potential areas of growth include the installation of additional bathrooms, e.g. en-suite and cloakrooms into properties, along with kitchen extensions and utility rooms.

The ‘Plumbing Contractors Market Report – UK 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Annual growth of 4-5% expected in the UK Facilities Management Outsourcing Market

The facilities management market has exhibited good levels of growth for much of the last twenty years, influenced by organisational desires to control non-core operational efficiencies and costs, and a trend within the private sector for companies to refocus their business in order to concentrate on core competencies. In 2014, the market for outsourcing bundled and Total Facilities Management services was valued at almost £19.5 billion.

The deterioration in the UK economy from mid to late 2008 had a negative impact on the development of the overall FM market. Previously the Labour Government’s policy to stimulate economic growth through public sector spending had supported the FM market, though the Coalition’s focus on reducing the deficit removed this stimulant. This market has now returned to more positive growth and is expected to continue to show annual growth, reaching a forecast £23.2 billion by 2018.

The market is considered to be relatively mature across a wide range of sectors. However, there are also newer forms of service which are far from mature – such as energy management, compliance services and workspace management – which, if approached professionally, will broaden the industry’s scope and client base. 

The economic downturn has heightened price competition in the market with end-users seeking better value for money. This has had a negative impact on contract prices and has resulted in lower market values and tighter margins. In addition the climate has led to clients seeking shorter contract lengths and more flexible terms.

The development of the facilities management market has been positively influenced by the trend to outsource an increasing array of services, with a gradual shift towards ‘bundled service’ and TFM contracts, adding to contract values. The corporate market represents the largest end use sector, accounting for more than 50% of the market, with central and local government accounting for around a quarter. Healthcare and education had been the most rapidly growing sector in recent years and now represent 18% of the market, though the growth of this sector has now slowed sharply.

“The impact of public sector spending cuts is not clear at the moment. The Government estates will undoubtedly shrink but our forecasts assume that outsourcing will be viewed as a means of saving costs - more so than an expenditure element to be cut”, said Keith Taylor, Director of AMA Research. “In addition some government cuts in the education sector for example have not led to construction output reductions, as Universities and Academy schools for example appear to have been successful in drawing in private sector investment.”

The key to advancement will be maintaining a high standard of service in core activities whilst adding value by offering enhancements and differentiated services. A key area of opportunity in the public sector is likely to arise within local authorities. This sector retains potential for an increase in the level of outsourcing, which may provide an opportunity to meet cost savings required.

The overall FM market will also continue to benefit from the shift away from single service contracts towards bundled service and total facilities management packages. The trend for private and public sector clients to outsource an increasing number of services, as well as to reduce procurement costs through seeking ‘one-stop-shop’ solutions is expected to continue, adding to contract values and favouring larger facilities management providers which can supply the full range of services required.

The ‘Facilities Management Outsourcing Market Report – UK 2014-2018 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Electrical Contracting Market Returns to Growth

The electrical contractors market was estimated to be valued at around £18.2bn in 2013, having seen moderate levels of growth since 2011, according to a report published last month by AMA Research. Growth rates are forecast to improve from 2014 onwards, although the market will remain competitive with profit margins under continued pressure.

While electrical contracting is thought to have been less affected than some other areas within the construction industry during the recession, the electrical contractor market declined in 2009/10. In 2011, increasing raw material prices provided a boost to the market in terms of value. However, this was offset to a great extent by weak demand in the private sector and the government’s spending cuts taking effect, and the growth rate seen in 2011 could not be sustained, leading to a flat market performance in 2012.

Current estimates are more positive, and point to a return to growth from 2013 onwards. Business confidence has been higher during the year and there have been some positive signs that the economy could finally be recovering from the downturn.

Competition remains fierce among contractors, with reports of businesses continuing to submit tenders at, or below, cost price in order to secure work or retain clients. Profit margins, which were already under pressure, have declined further. Consolidation activity amongst suppliers continues to be high within the market. This has led to a number of major players increasing in size over the past few years. The growth in strategic acquisitions is also in response to the growing focus on integrated services within the sector, with contractors widening the range of services offered.

A key area of growth in recent years has been installations aimed at improving energy efficiency and reducing carbon emissions, driven by increasingly stringent legislation and regulations around this, but also given impetus by the long-term cost savings that can be made by installing such systems, driven by increasing fuel costs.

Future prospects for the sector are moderately positive, with the electrical contracting market expected to show growth of around 3% per annum over the next few years. However, this depends largely on the performance of the non-domestic and domestic construction sectors. The housing sector is one of the key sectors likely to underpin growth within the electrical contracting market over the next few years, as demand for new housing is constantly increasing.

Keith Taylor, Director of AMA Research, said “Growth in the future is also likely to be motivated by legislation around carbon reduction, and renewable energy in particular. Solar panel installation currently represents a fast growing sub-sector of the electrical contracting market. A shift to LED lighting should have an impact on the market and data centres also remain a potential source of growth.”

Forecasts indicate that the market may reach £20.6bn by the end of 2018, providing the economic climate continues to improve.

The ‘Electrical Contractors Market Report - 2014-2018 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.