Bullish Noises For Bullish Noises’ Sake

glass half fullI’ve written before about the “credit-crunch come recession” (have a read of Recession and the P-Word if you haven’t already done so). Whilst I know I’m not alone in doing so, I do sometimes wonder if I am alone in publicly acknowledging the effect that this economic downturn is having (or is likely to have) on our industry. The reason I say that as that (at least until this week) pretty much all I’ve seen in the media is a series of press releases from service providers talking up the market. Advising us that, actually, a global recession is uniquely good for the FM industry.

Strangely, this week seems to be one for telling it like it is. Firstly, i-FM reports that the cleaning sector is feeling the pinch; recent growth figures have hit 14% per annum but this is expected to slow to 2% for the current year and just 7% over the next 5 years. This tells us nothing of the effect on margin, of course, but we all know that higher turnover doesn’t necessarily mean that profits aren’t eroded.

Then there’s FM World, which also seems to be reflecting the true state of the market now. On the subject of projects and capital spend, we find that “Interior Services Group has reported that many of its corporate clients have delayed or cancelled projects due to start in quarter four of 2008 or next year.” No surprise there, and I doubt that it isn’t a picture reflected in many, if not all, of that sector’s order books. More worryingly perhaps, a report earlier in the week shed some light on what’s really happening so far as a response to the present economic climate is concerned: “Businesses across the service sector have reduced investment and spend in their buildings and predict that this will decline even further over the coming months resulting in a spate of job losses across the FM sector. That was the gloomy message from the CBI’s quarterly Service Sector Survey…”

“In the three months to November, firms reported steep falls in business volumes and profitability, as well as plans to scale back employment and investment. Firms selling services to businesses saw the volume and value of their business, profitability and numbers employed fall at record rates – the steepest declines since the survey began in 1998. Companies are also cutting investment plans sharply as worries about future demand intensified.”

Now there’s nothing wrong with being seen to adopt a positive stance in the face of adversity, but that’s not the same as making bullish noises for bullish noises’ sake. The FM sector, like all other sectors, is being hit hard and the position is unlikely to change as we head into a New Year that might well see a number of established players do well to last the course.

To my mind, I do believe that opportunity exists out there, but I would add a large dose of realism to what I’ve seen written by others. For client organisations, it’s time to go back to basics with a review of FM strategy, a reconsideration of business need both in terms of services and service levels, and – out of that – an appraisal of supply options. From my own experience, this process usually becomes part of a “contract life-cycle” but there’s no reason why special circumstances shouldn’t result in a different approach and a different timetable. For service providers, it’s absolutely imperative not only to be proactive, but also to be innovative. Doing nothing will simply result in margins being eroded or – worse still – contracts being lost as clients align themselves with those organisations demonstrating a commitment to delivering better value. That’s “better value”, not “lower cost”, and the two things are not necessarily the same (although I accept, of course, that they often go hand in hand).

One thing I don’t see for 2009, however, is a year of business as usual. Those who pretend that it will be are likely to be the first casualties of the media hype I referred to earlier.

  1. #1 by Elliott Chase on December 10, 2008 - 3:39 pm

    Journalists are often accused of being far more interested in bad news than good; and some months ago we were even hearing a variety of senior politicians and industry leaders worry that collectively we were ‘talking ourselves into’ a situation that was worse than it needed to be.

    Unjustified talking up certainly isn’t helpful; but neither is unjustified talking down.

    “Businesses across the service sector have reduced investment and spend …. resulting in a spate of job losses across the FM sector.” For me, a statement like that immediately raises a series of questions.

    First, is the CBI really taking FM sufficiently seriously to single it out in its report? Sadly, no. There is no mention of FM in the CBI press release. Our industry falls into ‘office & personnel services’, which itself is just one part of a sector that spans everything from accountants and lawyers to hotel operators and travel companies.

    Second, can we at least assume that FM providers had a significant input into the research? Probably not. Only 195 firms responded and therefore represent the entire broad sector. The CBI assures us the ‘a few’ FM companies are included, however.

    Third, what does the CBI understand by FM? We’re back to ‘office & personnel services’ on this one. No names, or even hints about the sort of companies participating, are forthcoming.

    Fourth, does this survey tell me anything I can rely on about my own industry? Well, no. It’s good on the service sector as a whole and confirms my general negativity about the state the UK is in; but as far as FM goes, it’s more context than a targeted report.

    A part of the underlying problem, of course, is definition. More specific market reports recently have highlighted tight conditions for cleaning (as you note) and HVAC . But I’m with Martin Pickard on this one: I am uncomfortable using the blanket term FM to cover the whole sprawling facilities sector. And I will probably be expressing the same reservations in a year or two when someone starts to make broad market statements based on the new, but quite limited, SIC code the government has provided for us. These are days for avoiding media hype but also for being as accurate as we can.

    OMG I’m turning into a grumpy old man!

    I’m not sure about the “grumpy old man” bit, Elliott, but that aside I wouldn’t argue with what you say. I think that my post was prompted as much by the very vague and misleading comments I’ve read that emanated from the FM industry (by which I mean the “real” FM industry) as it was by the pieces I quoted and which you rightfully critique.

    What worries me more than anything is that those who genuinely believe that they’re buffered from what lies ahead will fail to take the action necessary to counteract and pre-empt it. In that sense, my own comments were, in effect, a call to arms!

  2. #2 by Graham Leach on February 13, 2009 - 9:37 pm

    Tony,

    Refreshing to see that the media coverage of the “Credit Crunch” in FM related publications has caught your attention.

    From the “Coal Face” as it were, recruitment is in the first cost cutting excercises that clients are targetting. The number of vacancies on Hold/Cancelled or a full Recruitment Freeze is adding up daily.

    Whilst there are contractual agreements to be adhered to in FM contracts, these are being looked at with Cost Saving coming into the equation.

    It is going to be a long road out of this recession and I would go as far as saying 2009 is a write off in terms of real profit and a stand still at best to stay in business taking into account reduced fees and margins.

    Regards

    Shhhhhh… you know we’re not meant to acknowledge the recession, Graham – the FM industry’s going to have a great year, haven’t you heard?

    Seriously, though, this is precisely the kind of reality check I was hinting at in my post. Thanks for the honesty.

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