24 January 2008
Retail sales are down, the housing market is stalling and the outlook for the jobs market is as gloomy as it has been for a decade. Finally, after months of threatening, it appears as though the credit crunch which began in the obscure world of collateralised debt obligations, asset backed securities and structured credit products linked to the US sub-prime housing market is beginning to take the UK economy in its icy grip.
So with doom and gloom pervading the media and the public consciousness it appears as though we could be talking ourselves into recession even before the classic indicators have begun to flash their warning signs. But, before we all throw in the towel, the signs are that the FM market could display all the classic signs of a 'counter-cyclical' sector somewhat immune to economic downturn, in fact it could even find itself in even more demand during an economic downturn as companies and governments scramble for the efficiencies and cost savings that outsourcing their FM functions can offer.
Much has been made, and written, about the continued trend toward public sector services and infrastructure being outsourced, and undoubtedly this trend will continue with Gordon Brown and his rival David Cameron both keen to espouse the efficiency the private sector can bring to the public sphere. But, in the private sector itself outsourcing remains a key theme as major corporations seek to slim down their asset and cost bases to continue to compete in a tough global economy.
The UK lags the US significantly in terms of outsourcing and the gap is likely to continue closing in years to come. Globalisation is also taking the outsourcing trend into new territories and creating truly global outsourcing operators. Globalisation may also help outsource specialists to ride out choppy market conditions in specific regional markets, as highlighted by property specialist Savills in its recent trading update. Savills is a diversified business spanning estate agency, property consultancy, financial services and facilities management. This diversification, and its global presence, has helped to mitigate troubled trading conditions in its UK commercial property business and Savills will beat analysts' expectations for 2007 when it publishes its full year results in March.
Its property and FM business has benefited from diversifying into Europe and the Far East having acquired a property management business in Germany, which has boosted its presence in European markets. In Asia Savills' facilities management business, called Guardian, enjoyed a record performance in 2007 winning new contracts in Hong Kong and Macau, an indication of the potential focus for growth in global FM markets. So, despite the doom and gloom us journalists are peddling over the prospects for the economy both here and in the US there is no need to panic over the state of the FM sector just yet.
Of course there will continue to be winners and losers as there have always been in both good times and bad and the trend appears to be heading towards the bigger players who can establish a global presence enjoying more than their fair share of the spoils.
Graeme Davies writes for Investors Chronicle