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23 APR 2019

BCIS forecasts for the FM sector: April 2019

Maintenance costs, as measured by the All-in Maintenance Cost Index, rose by 3.9% in the year to 4th quarter 2018. The annual rate of growth in costs is expected to fall slightly to 3.8% to 4th quarter 2019, but then rise again to between 4–5% per annum for the rest of the forecast period from 2020 to 2023.

Repair and maintenance (R&M) output is forecast to rise by less than 1% in 2018 and 2019, then grow by an average of 2% per annum between 2020 and 2022.

Maintenance prices are forecast to remain virtually unchanged during 2018, followed by an annual increase of 3.1% by 4th quarter 2019. With output increasing in 2019 and 2020, it is anticipated that maintenance prices will rise by 3.9% in the year to 4th quarter 2020. Over the final three years of the forecast period, with sharper growth in total output and increasing pressure from input costs, prices are forecast to rise by over 6% per annum in the years to 4th quarter 2021, 2022 and 2023.

Cleaning costs rose by 5.2% in the year to 4th quarter 2018, mainly due to the introduction of the National Living Wage (NLW) on 1 April 2016. Costs are forecast to continue to rise by close to 5% per annum over the forecast period as the NLW is increased to a target of £9.00 per hour by 2020.

With the sharp fall in Sterling following the EU Referendum, upward pressure will have been put on oil and consequently energy prices in the UK. Sterling initially fell by 18% against the US Dollar but has since recovered to a fall of 13%. The Brexit negotiations are making exchange rates of Sterling against the US Dollar and the Euro quite volatile currently.

There is still a great deal of uncertainty over the terms that will be agreed when the UK leaves the EU. It is presently looking increasingly likely that Britain will not leave the EU until later in the year, with the 31 October as the most likely date. While almost any outcome is still possible, we 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. More details of the three scenarios can be found in the BCIS Quarterly briefing, March 2019.