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News & opinion

13 NOV 2018

BCIS forecasts for the FM sector

The BCIS five-year forecast for the facilities management sector shows maintenance costs rising 22% over the next five years, while cleaning costs rise 26%.

Maintenance costs, as measured by the BCIS All-in Maintenance Cost Index, rose by 4.4% in the year to 2nd quarter 2018. The BCIS five-year forecast is for maintenance costs to rise by 3.8% to 2nd quarter 2019 and by a further 3.6% to 2nd quarter 2020. It is then forecast to rise by around 4% over the next three years.

Cleaning costs rose 4.9% in the year to 2nd quarter 2018, according to the BCIS Cleaning Cost Index. The BCIS forecast is for cleaning costs to rise by around 5% per annum over the next three years, falling to closer to 4% thereafter. The main influence on cleaning costs is labour. These costs are heavily influenced by the National Living Wage (NLW), which the government has indicated will increase by 25% between 2015 and 2020.

Maintenance costs and cleaning costs

Source BCIS

There is still a great deal of uncertainty over the terms that will be agreed when the UK leaves the EU.

While almost any outcome is still possible, BCIS will continue to produce forecasts based on three scenarios. These reflect the different outcomes from the exit negotiations from the EU and are equally likely. The uncertainty of the results of the Brexit negotiations will undoubtedly lead to BCIS revising its assumptions again as more is known.

In all scenarios the forecast assumes that there will be no change of UK government over the forecast period; that there is political stability in the rest of the world, and a gradual rise in interest rates puts pressure on consumer spending.

Although a 'No Deal' is currently being discussed as an option, this may encompass a raft of specific deals and has increased the range of possible outcomes. A specific forecast for this option has not been carried out. However, the likelihood is that a 'No Deal' would tend towards our downside scenario.

BCIS has produced three scenario forecasts: ‘central’, ‘upside’ and ‘downside’; these terms relate to the impact on construction demand. The downside scenario results in the greatest cost increase as restrictions on workers from the European Union (EU) push up labour costs and further falls in Sterling affect materials. The three scenarios are:

  • An 'upside' scenario based on the following assumptions – there will be an initial slowdown in the whole economy; picking up to pre-EU levels after that. It is assumed that there will be a smooth withdrawal process from the EU following a two-year 'transitional period'; any trade agreements with the EU will be the same as prior to the EU Referendum, and those with the rest of the world will boost the UK economy.
  • A 'downside' scenario based on the following assumptions – there will be a UK recession like that following the financial crisis of 2007. It is assumed that the UK has a 'hard Brexit' at the end of the two-year period following the signing of Article 50, i.e. from 1st quarter 2019. It is also assumed that following withdrawal from the EU, any trade agreements with the EU are a lot less favourable than prior to the EU Referendum.
  • A 'central' scenario based on the following assumptions – there will be reduced or delayed investment in the private non-housing sector over the upcoming years as the inevitable hiatus around whether to invest or not unfolds. It has also been assumed that investment in public sector non-housing will not be affected by the decision to leave the EU.

The central scenario has been used as the published forecast on BCIS Building Running Costs Online for the maintenance cost indices.

The graph shows the three scenario forecasts.

Maintenance cost scenario forecasts (BCIS All-in Maintenance Cost Index, base 1Q1990 = 100)

Source BCIS

The BCIS maintenance cost and cleaning cost indices and forecasts, together with indices and forecasts for energy costs, are included in the BCIS Building Running Costs Online Service.

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