UK cuts may force FM firms to expand abroad
December 2009
According to figures stated by Seymour Pierce, whoever wins the next election, it is clear that there will be a significant financial gap to fill. The contention has shifted from who will or won’t cut public spending, capital projects and public services to who can cut most skilfully and efficiently.
The numbers unveil the scale of the problem for whoever is in charge by next summer. According to research conducted by Seymour Pierce, total UK public expenditure in the current financial year is expected to hit £671.4bn, which is not only half of the UK’s Gross Domestic Product but is also the highest level since 1977. This will burden the country’s budget with a deficit of £175bn which will need to be reduced drastically in the coming years. In this context, for the period beginning from 2011, the next three-year spending review is expected to be one of the most austere ever seen.
The huge efficiencies will be targeted through the outsourcing of public services and services and building programmes will be inclined to reduction. Many FM companies are hoping to replace the reduced capital expenditure programmes in the years to come through precisely this sort of outsourcing.
Even though health and education are normally left untouched, capital projects in these areas will definitely come under menace, affecting those FM outfits with construction businesses. This is also true for social housing, where there may be more funding for maintenance and management contracts, but reduced funding for new build.
It is for this reason, that, amidst others, some FM businesses have continued their efforts to diversify outside of the UK. For example, Balfour Beatty, has regularly won contracts in the US and recently sealed a deal to buy consulting and engineering group Parsons Brinckerhoff, with chief executive Ian Tyler describing the move as a “transforming” deal. With 24 per cent of Balfour’s revenue already coming from the US this will reduce exposure to the strained UK economy even more, a wise move considering the prospects for the next few years.
Michelle Williams from Artemis Solutions Group who specialise in recruiting for the Facilities Management sector comments “This will be a government that is strapped for cash and looking for whatever savings it can find. Whilst some FM players may win in one sector there is every chance they will suffer elsewhere. Moreover, contracts may not be as lucrative as expected.”
