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Marketplace and operating review
Markets evolve, but opportunity remains Our sector continues to evolve and to present us with new and changing opportunities to help organisations in both the public and private sector access the advantages of outsourcing. The trend for clients to move from outsourcing single services to bundling a number of them together, and then moving on to buying integrated services, is now well-established. However, what has become increasingly clear is the importance of shaping our services – and our structure – to meet the fast-changing needs of our clients. To this end, we have evolved the organisation of our business, focusing our efforts on four business divisions: Facilities Management, Property Management, Healthcare and Energy Solutions
A challenging environment The UK economy has not improved and many companies in the private sector continue to tread water at best. Faced with tough market conditions and an ever-increasing need to cut costs and improve efficiency, the outsourcing of non-core services is an attractive option for many of these companies. Central government and local authorities are also cutting costs wherever possible and the public sector continues to offer significant opportunity. This is particularly true in the justice, social housing, education and health sectors, all areas where we are active. Outsourcing is an industry that grew out of response to recession, and has continued to evolve in response to economic pressures.
According to a report published in November 2012 by Oxford Economics for the Business Services Association, the total value of outsourcing in the UK is currently estimated to be in the region of £199 billion, with a 64%-36% split in favour of the private rather than the public sector. This equates to almost 7.5% of the total economy-wide output, but perhaps more importantly, the report found that the outsourced service sector pays 9.5% of government tax revenues and employs 10.5% of the UK workforce. During the year, we saw notably increased demand, not only from companies turning to outsourcing for the first time, but also in the growing number of large integrated FM contracts coming to the market, as established clients recognise the benefits of outsourcing at the bottom line and look to see them applied across a broader section of their non-core services.
As the financial year came to a close, we evolved our structure to reflect changing market conditions. Research told us that clients view FM provision as a set of similar services, so we have now grouped these under a single FM division, which delivers a range of hard and soft services as either specialist single services, as bundles of services, or as fully integrated FM contracts. Our Property Management division will continue to provide a full suite of property maintenance services for commercial clients and the social housing market. At the same time, we have elevated our Healthcare and Energy Solutions businesses to standalone divisions. We outline the opportunities facing the four divisions on the next page.
MITIE Group PLC Annual Report and Accounts 2013