FM Outsourcing Down 6% Due to COVID

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January 28, 2021

In 2020, the market value of facility management outsourcing has fallen by around six percent, mainly due to COVID-19 and the lockdown measures that have been used to try to stop the spread.

Although FM contracts continued to be issued over the past year, the UK economy is expected to take a severe blow, with budgets and investment decisions likely to be negatively impacted, according to a paper by AMA Research: Facility Management Outsourcing Market Report – UK 2021-2025 .

The impact of the lockdown measures in place across the UK has been particularly severe for several key end users of FM services. Notable examples are retail, leisure (e.g. gyms and sports stadiums) and the hotel industry, ie pubs, cafes and restaurants. Meanwhile, the restriction on international travel has also affected consumer FM sectors such as hotels.

The number of FM contracts tends to increase with economic growth

Prior to 2020, the pooled outsourced FM market saw relatively steady growth of around 3 percent per year, with the exception of 2017 when the political uncertainty caused by Brexit led to a slowdown. Between 2015 and 2019, the market value rose by almost 10 percent.

The FM market is considered to be relatively mature in a variety of sectors, which is likely to stifle growth over the next several years. The development of the market continues to depend heavily on the current political and economic situation in Great Britain and its effects on households and investments.

Fiona Watts, assigned research manager at AMA Research, commented:

“It remains to be seen to what extent end-user sectors such as retail, leisure and hospitality will recover from COVID-19 and the related economic impact of the lockdown.

“Given that many struggled to remain profitable before the pandemic, it is likely that many companies will either cease operations or drastically downsize their properties, reducing the demand for FM services.”

The market for outsourced FM services is expected to recover in the years after 2020, although the extent will largely depend on the economic situation in the UK. In the past it has been suggested that outsourcing is largely sheltered from the worst of the effects of business cycles. In times of economic slowdown or recession, customer cost-cutting measures can often stimulate demand for FM services. In times of economic growth, the number of FM contracts tends to increase.

Image: a photo of a desk with a laptop keyboard and a piece of paper with various graphics. A hand points to one of the graphs

Article written by Ella Tansley | Published on January 28, 2021

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