A sector that has been long overlooked and considered a commodity service is delivering essential facility services to ensure the continuity of our national concerted effort to suppress the COVID-19 outbreak. We look at what facilities management companies are doing to help.
Facilities management companies - the unsung heroes
The built environment has now become a bedrock in supporting critical roles, from health and social care to transport and utilities, as the UK accelerates its health response. The industry has actively come together as a community to maximise its resources and now plays a pivotal role in tackling the spread of the virus.
As an example, the Do Some Good campaign has facilities management organisations actively volunteering their support to provide space and accommodation, medical supplies, and operational support. Companies are establishing safe and compliant workspaces to key workers by repurposing vacant properties, such as the united effort in transforming the ExCel London exhibition centre into a temporary NHS Nightingale hospital.
Organisations and employees are protecting our national wellbeing by elevating the critical nature of the services delivered by facilities management firms to keep the UK safe and operational. We're happy to see this contribution being recognised.
Mixed business impact on facilities management firms
Despite the ongoing demand for critical service provision, companies are facing a reduced level of activity across many customer sites and a decline in project work. As a result of the government effectively shutting down the hospitality, retail and leisure market and enforcing non-key employees to work from home, most workplaces have become dormant. This has led to customers across the UK seeking to suspend contracts and equally preserve cash in a bid to enhance financial resilience during the challenging months ahead.
The European facilities management services conglomerate, ISS reported that, while its operating margins are supported by contract clauses and a flexible cost structure, it is facing a reduced level of activity across many customer sites. The group has decided to withdraw the proposed ordinary dividend ahead of their annual general meeting in April, and we expect other listed competitors to follow suit.
Our view on the sector remains mixed, as the continuation of essential services has led to a demand in responsive facilities management, however we expected a deferral in discretionary project work and non-essential maintenance spend to minimise this upside. As a result of a reduction in client demand, companies will need to assess and re-deploy resource across sectors and disciplines and start considering long-term preparations.
Pooling labour resource
There has been a logical up-tick in demand for soft services within the public sector, finance and food environments, with companies such as Mitie expecting little to no impact in demand because of COVID-19. To manage resource capacity and reduce potential bottlenecks across the sector, the government is considering the creation of a ‘clearing house’ to enable furloughed employees of one service provider to be redeployed on a contract managed by another.
The goal is to ensure continuity of service delivery in anticipation of high levels of absenteeism as contract staff may be hit by the illness and self-isolation. More than ever, the sector will need to work collaboratively and share best practice to keep the UK operational during these unprecedented times.
Businesses need to assess the situation as the state of the nation evolves, ensuring they are actively monitoring daily guidance and following government guidelines. Read more information on the available government support.
We've distilled our focus points into six key areas for companies to consider:
Adapting to the circumstances, while trying to create a greater certainty of demand and supply
Training a multi-disciplinary operative base
Allocation and redeployment of labour resources
Defer non-essential and uncommitted capital expenditure
The market outlook for facilities management firms
Although the outlook remains unclear, we can be encouraged by the solidarity shown by the sector to address the pandemic. Initiatives such as repurposing vacant properties and pooling scarce resource, underpin a pro-active approach set by facilities management companies to prioritise national health and subsequently maintain a degree of productivity witnessed before the outbreak.
We expect the facilities management sector to bounce back resiliently once normality resumes, and a heightened focus for cleanliness and well-being in the workplace to be prioritised on the public and corporate agenda. The perception of facilities management will change, to the benefit of the sector, and companies should embrace collaborative initiatives that unlock productivity synergies and improve operational performance, together with a cohesive tech-enabled approach that optimises maintenance regimes remotely.