Business services: investment in a growing sector

With high levels of domestic and international investment, the business services sector has continued to go from strength to strength. Several factors and market dynamics have contributed to the investment and success of companies in the sector:

Six key takeaways

1 Significant investment in the business services sector has been driven by:

• • increased regulation
  • the provision of critical services
  • the transformative impact of technology on traditional labour-led business models
  • skill shortages and decarbonisation.

2 Investment has led to companies having high levels of revenue visibility and maintaining sustainable margins, despite challenges in the economy.

3 The sub-sectors which have seen the most activity include blue and white-collar services within the built environment, skills and training, and professional services.

4 The built environment has seen a marked increase in investment, particularly across:

• • technical mobile services related to compliance services
  • the emphasis on social housing, driven by Labour Government initiatives
  • heightened regulation in the fire sector following the Grenfell tragedy, leading to increased scrutiny and investment in compliance-related services
  • ongoing decarbonisation efforts, leading to further investment in sustainable practices and technologies.

5 Value drivers within business services include a broad customer spread and the ability to retain key clients – important attributes for long-term stability and resilience. Also, businesses that can maintain healthy margins in an inflationary environment, and a strong emphasis on compliance, present attractive qualities.

6 High levels of recurring revenues, visibility over earnings and low capital expenditure (capex), paired with strong operating cash flow, create an appealing financial profile for investors looking at business services companies. Such attributes position businesses as strong investment opportunities, even in uncertain economic times.

For more insight and guidance, get in touch with Usman Malik.