Facilities management (FM) covers a vast array of services, each of which have been impacted by COVID-19 to very different levels. Variations are also evident in end-use markets and have resulted in very different impacts for individual FM providers. Some sectors, notably catering, have been badly affected during 2020 by school closures, the banning of spectators at sporting events, the temporary closures of businesses and the encouragement of remote working. Even in this sector, some markets have held up well, with healthcare a particular example.

The public sector including healthcare has proved a buoyant market for facilities management in general during 2020, with Nightingale hospitals and activities such as track-and-trace offering opportunities for the largest operators. While COVID-19 will be treated as an exceptional item in government borrowing, the prospect of a relaxation in public spending restrictions has declined, and those cost pressures will afford further opportunities for the FM sector.

Structural changes in the industry have been evident over a number of years, with the collapse of Carillion a major example. Interserve also went into administration, though its facilities management arm was subject to a takeover by Mitie in 2020, which will create the largest FM company in the UK. G4S, meanwhile, is facing two hostile bids.

Despite this seeming growth in industry concentration, the sector is characterised by a confined number of very large operators gaining national and international contracts, though their market share remains modest in terms of the total outsourcing market (but much stronger for public sector services).

Key issues covered in this report

  • The major diversity of the COVID-19 impact, with significant variation between services offered, end-use markets and the size of the facilities management operator

  • The considerable potential for the further conversion of services currently conducted in-house

  • Structural changes in the industry, with the significant acquisition of the facilities management activities of Interserve by Mitie

  • The continued pressure on margins, with above-average labour cost increases in a labour-intensive sector

  • The continued trend towards technology to differentiate the facilities management offer

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It wasn't until 15 June that non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions. 

If case numbers remain high, it can be expected that the lockdown will be extended in England. However, even if the second national lockdown ends as planned on 2 December, the current plan is to return to the regional tiered approach in force before the lockdown, meaning that large parts of the country may still effectively be locked down. 

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report and amended by the November 2020 central scenario. The scenario suggests that UK GDP could fall by 11.3% in 2020, recovering by 5.5% in 2021 and a further 6.6% in 2022, and that unemployment will reach 6.8% by the end of 2021.

The current uncertainty, however, means there is wide variation on the range of forecasts, and this is reflected in the OBR’s own scenarios.

The Welsh and English lockdowns will inevitably have an impact on GDP and consumer finances, potentially shifting the UK closer to the OBR’s downside scenario. The market forecasts in this Report reflect this new reality.

From the start of the outbreak, we have made the assumption that an effective vaccine would not be widely available until well into 2021. On 9 November, Pfizer and BioNTech announced highly encouraging results from trials of their vaccine, followed by similarly positive results from Moderna. This means that a vaccination programme may be brought forward, but a full rollout will take many months, so Mintel is still making the assumption that we will be living with COVID for some time to come.

Products covered in this Report

For the purposes of this Report, MBD has used the following definitions:

The potential facilities management market includes work contracted to third parties, including total facilities management (TFM) contracts (also often called integrated facilities management or IFM), and the value of projects undertaken in-house.

The market is segmented into the following sectors.

  • TFM, where the full responsibility for undertaking and organising facilities management services is contracted to a third-party company who undertakes the work or sub-contracts the work to other companies.

  • Contracted-out projects, where ancillary services are contracted out to third-party companies on an individual contract basis. This allows the client company to retain strategic control over facilities management and budgeting. The value for contracted-out services stated in this Report includes contracts by single service providers and facilities management companies.

  • In-house projects, where ancillary services are undertaken by in-house staff. These non-core activities represent the remainder of the potential market for facilities management companies.

The value of the market includes manpower costs, operational management and strategic management, including services, consultancy and training.

The sector includes a broad range of ancillary services provided by single service contractors and facilities management companies. These are conventionally split into soft facilities management and hard facilities management services. The former group include activities that support the operation of a facility, such as:

  • security services

  • cleaning services

  • catering services

  • postal services

  • secretarial services

Hard facilities management services refer to activities that support the maintenance of a facility, such as:

  • gardening and landscaping

  • building fabric maintenance

  • lift and escalator maintenance

  • lighting

  • building design

  • plant replacement

  • construction management

  • energy and environmental management

However, as the market has matured and developed, different companies are taking a broader view of the market, which can have few limitations. Some companies either specialise or target public service provision, extending the market to a vast range of services, such as the provision of homes for the elderly/care centres. Other companies have identified the prevalence of provision to enterprises, and have looked to extend the market to smaller companies by entering the serviced office sector (typically serving new start-ups). Many are now looking to technology to leverage a position based on information and efficiency, in an attempt to move away from the price pressures of certain parts of the industry.

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