Industry Insights

ICT

The UK’s ICT market offers excellent business opportunities, especially in cybersecurity, software and SaaS cloud computing, fintech, and the Internet of Things. In addition to its competitive nature and moderate concentration, the UK ICT market has an abundance of business innovations (NI et al., 2022). As Mordor Intelligence’s findings show, key players adopt product and service innovations to maintain market share, followed by mergers and acquisitions that allow them to expand and remain competitive (Mordor Intelligence, 2023).

ICT companies in the United Kingdom are among the world’s most significant, contributing significantly to economic growth. By investing in ICT, the UK can continue to compete in the global market, ensuring businesses have access to cutting-edge technology. Investing in ICT helps the UK’s economy to be sustainable over the long run by encouraging innovation, creating jobs, and improving public services.

ICT solutions are now focusing on keeping companies competitive and a step ahead. Among these technologies are IT infrastructure, cloud computing and data analytics, which will help businesses make the most of digital transformation. Artificial intelligence and machine learning are the keys to this advancement (Mordor Intelligence, 2023).

ICT is predicted to grow at a 7.8% annual rate in the UK when new technologies like edge computing and quantum computing are implemented, leading to new job opportunities and enabling businesses to improve their services. As a result, companies can do more with fewer resources, leading to greater workplace efficiency. Consequently, firms will have to shift their IT systems to the cloud to cope with the growing amount of data generated by this expansion (Mordor Intelligence, 2022).

Industry challenges:

Delivering business results despite macroeconomic uncertainty
Having to navigate business prospects in an uncertain environment
Achieving regulatory compliance
Identifying and filling the technological skills gap
Keeping costs in check while maintaining performance

(Deloitte, 2023; Global Data, 2022; Open Access Government, 2023)

Investment opportunities:

(Computer Weekly, 2023; Open Access Government, 2023)

Statistics:

The United Kingdom’s ICT market is estimated at £122,39 billion (Global Data, 2023)

100%

As of January 2022, 66.99 million UK internet users were online (Mordor Intelligence)

100%

The number of mobile connections in the UK was 71.8 million in 2022, an increase of 3.8% from 2021 (Mordor Intelligence, 2023)

3.8%

Recruitment

In 2024, the UK recruitment industry is navigating significant trends shaped by economic factors and labour market dynamics. Between February and March 2024, payrolled employees fell by 5,000 but increased by 288,000 year-on-year. An early estimate for April 2024 showed a monthly decrease of 85,000 yet an annual rise of 129,000, bringing the total to 30.2 million, though this is provisional. The employment rate for people aged 16 to 64 was 74.5% in Q1 2024, down from the previous year and quarter. The unemployment rate rose to 4.3%, and the economic inactivity rate increased to 22.1%. In April 2024, the UK Claimant Count grew by 8,900 from the previous month and by 29,300 annually, totaling 1.579 million (Signature Recruitment, 2024).

Vacancies decreased by 26,000 in the quarter ending April 2024, reaching 898,000, marking the 22nd consecutive decline, though still above pre-pandemic levels. Permanent staff placements fell for the nineteenth month in April, but the rate of decline slowed, with the Permanent Placements Index hitting a ten-month high. Demand for temporary workers fell slightly, showing the weakest decline in the current sequence. Employees’ average regular earnings grew by 6.0% annually from January to March 2024, while total earnings, including bonuses, grew by 5.7%. In real terms, regular pay increased by 2.0% and total pay by 1.7% (ONS, 2024).

Demand for permanent staff declined for the eighth consecutive month in April, albeit at a slower rate, while temporary staff demand also fell but less sharply. Notably, private sector vacancies for temporary staff saw a modest increase, while public sector demand for both permanent and temporary roles decreased. Permanent staff availability grew significantly across all English regions, with London experiencing the strongest growth. Temporary staff availability rose at the fastest rate since December 2020, particularly in London (Prism, 2024).

Market sentiment, as reported by the KPMG & REC UK Report on Jobs for May 2024, shows cautious optimism. CEOs are hopeful that a reduction in interest rates will boost investment confidence. The report noted slower declines in permanent and temporary staff appointments, improvements in pay rates, and increased staff availability. Positive indicators include increased confidence among small businesses, the UK exiting recession in May 2024, and expectations of falling inflation. Despite ongoing challenges, there are signs of cautious optimism and potential growth in the latter half of 2024 (Prism, 2024; Signature Recruitment, 2024).

Industry challenges:

Market Stability and Economic Confidence: Economic confidence is rebounding cautiously, but there's still uncertainty.
Salary Growth: Permanent staff salaries rose at the weakest rate in over three years and Temporary staff wages increased at the slowest rate in four months.
Labour Disputes: Significant working days lost due to labour disputes, particularly in the health and social work industry.
Regulatory and Legislative Issues: Calls for reforms in regulation, including IR35, regulating the umbrella market, and flexibility in the Apprenticeship Levy.
Economic Inactivity and Unemployment Rates: Increases in economic inactivity and unemployment rates.

(Signature Recruitment, 2024)

Investment opportunities:

Hiring Activity: An increase in job postings suggests rising hiring activity, offering opportunities for recruitment agencies.
Agency Workers: Employers plan to increase their use of agency workers, especially in London and the South East. A forecasted 15% increase in demand for agency workers.
Wage Increases: Statutory increases in Minimum Wage and National Living Wage might lead to higher consumer spending, potentially stimulating economic activity and job creation.
Positive Economic Indicators: Growth in total earnings and regular earnings and lower inflation providing a stable environment for business growth and hiring.
Temporary Labour Market: The temporary labour market is critical for economic stability and can be an investment focus for firms looking to maintain flexibility amidst uncertainty.

(Signature Recruitment, 2024)

Statistics:

Employment Market Data: Number of active job postings in March 2024: 1,908,641, an increase of 35,255 from February (Signature Recruitment, 2024)

100%

UK economic inactivity rate now at 22.2%

22.2%

The estimated number of vacancies in January to March 2024 was 916,000, a decrease of 13,000 or 1.4% from October to December 2023 (ONS, 2024).

1.4%

60% of recruitment leaders are either ‘optimistic’ or ‘very optimistic’ about the year ahead (Firefish Software, 2024)

60%

37% of businesses increased their hiring in Q1 2024, which is consistent with Q1 2023 (with January typically the busiest month for recruiters) (Total Jobs, 2024)

37%

Facilities Management

The UK facilities management (FM) industry is poised for significant growth in 2024, driven by steady economic expansion and increased investment from businesses in their workplaces and infrastructure. This growth is expected to create substantial demand for FM services as organisations seek to reduce costs, improve efficiency, and access specialist expertise.

Private sector buyers are particularly optimistic about the FM sector’s prospects, with expectations of continued growth fueled by the need to enhance operational efficiency and manage costs effectively. The private sector is projected to offer over £2.5 billion in opportunities through contract renewals across 2024. Notably, March is anticipated to be the most lucrative month, with contracts worth £555 million up for renewal, while September will see the highest number of contracts renewed. The first quarter of the year is set to be the most profitable for FM suppliers, offering 27 contracts valued at £1.1 billion in total contract value (TCV).

Leading private sector entities such as Knight Frank, Quilter, and UBS are among those with significant offerings for 2024. This presents both a challenge for current suppliers to retain their contracts and an opportunity for competitors to secure new business. The sector-wise distribution of these opportunities reveals that the “Office” sector leads with a 23% share of all value deals, followed closely by “Leisure,” driven by sports and entertainment companies, at 18%, and “Finance & Insurance” at 15%. Other notable sectors include Housing and Retail.

Integrated FM contracts, which include both soft and hard services, will dominate the demand from renewals, commanding around one-third of the total opportunities with a contract value of £809 million. Catering services are expected to account for 18%, while multiple hard FM contracts, covering more than one service area, will represent 17% of the total opportunities. Mechanical and Electrical (M&E) services will contribute approximately 8%, with contracts worth £198 million.

The outlook for the UK FM sector in 2024 is particularly promising from the perspective of private sector buyers. The anticipated growth is driven not only by economic expansion but also by an increasing trend towards outsourcing and a growing appetite for premium services. This growth is further amplified by the escalating importance of digital transformation, decarbonisation efforts towards net-zero emissions, enhanced customer experience and hospitality services, robust ESG (Environmental, Social, and Governance) strategies, and customer-aligned workplace solutions (Mintel, 2024).

Despite this optimistic outlook, the facilities management industry faces challenges due to economic uncertainty, with some clients in both the private and public sectors reducing spending amid inflationary and budget pressures. Nevertheless, this environment also creates opportunities for FM providers, as businesses look to outsource services for cost efficiencies. Inflationary pressures are beginning to ease, though staff shortages remain a significant challenge for the industry.

The UK facilities management market is substantial, with a potential market size of over £150 billion in 2023, encompassing all contracted-out services and the commercial value of in-house provided services. Looking ahead, it is crucial for FM providers to address staff and skills shortages by offering competitive wages, good working conditions, and benefits such as flexible working. Additionally, the deployment of technology, such as robotic cleaners and automated food retail solutions, is becoming increasingly important to reduce reliance on manpower and enhance service efficiency.

In conclusion, while the UK FM industry faces economic uncertainties and operational challenges, the sector is well-positioned for growth in 2024. By capitalising on technological advancements, embracing sustainability, and responding to evolving client needs, FM providers can navigate these challenges and seize the opportunities presented by a dynamic and expanding market (Baachu, 2024).

Industry challenges:

Increased Competition: The high level of competition among service providers is leading to commoditisation of FM services, which impacts profit margins and growth of existing vendors.
Inflationary Pressures: Rising inflation rates, with the UK experiencing significant inflation in recent years, are increasing operating costs for FM companies. This can squeeze profit margins unless companies can pass these costs onto clients through higher prices.
Economic Recovery: The industry is still adjusting to post-COVID economic conditions. Although economic stability is gradually improving, the market demand and profit margins are anticipated to grow slowly.
Technological Integration: The growing need to integrate advanced technologies like IoT, AI, and building information modeling into FM operations poses challenges for service providers in terms of investment and training.

(Global Information, 2024; Expert Market Research, 2024; Statista, 2024; IBIS World, 2024; Mordor Intelligence, 2024)

Investment opportunities:

AI Integration: Capitalise on the rising prominence of AI in facilities management to enhance efficiency and communication with tenants.
Digital Assistant Solutions: Invest in NLP and ML-based digital assistant solutions to automate inbound and outbound communications, improving real-time updates and customer interaction.
Outbound Communication Tools: Explore investments in AI-driven tools for proactive outbound communication, enabling facilities managers to engage customers effectively and automate reminders and feedback requests.
AI Development and Integration Services: Consider investing in companies offering AI development and integration services tailored for facilities management, tapping into the growing demand for AI-driven solutions in the industry.

(FMJ, 2024)

Statistics:

Integrated FM/Bundled FM services form the most significant segment of the UK FM market, contributing to over 40% of the market (Baachu, 2024)

40%

In a recent poll conducted by the experts at SFG20, 66% of asset owners and property managers revealed that keeping a golden thread of information about a facility up to date has been a main concern for their business (Industrial Compliance, 2024)

66%

UK Facilities Management Industry Revenue: ¬£19.4 billion (IBIS World, 2024)

100%

The UK Facility Management Market size is estimated at £55.69 billion in 2024, and is expected to reach £60.50 billion by 2029, growing at a CAGR of 1.65% during the forecast period (2024-2029) (Mordor Intelligence, 2024).

1.65%