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, according to market research.
A report on the UK facilities management market from MTW Research concludes that 85 per cent of FM contractors have healthy finances in spite of 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 the second half of 2022 with a 10 per cent sales boost.
MTW identifies key changes in the FM market owing 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 owing to uncertainties affecting recent and near-term demand for outsourcing. However, MTW points 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 substantial.
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. While revenues for many IFM/bundled service providers remained reasonably resilient in H1 2020, industry net worth plunged by more than 60 per cent. However, sources in 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 presents several unique opportunities for the IFM sector and associated suppliers.
MTW’s director Mark Waddy said: “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 has 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 while 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.