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News & opinion

28 OCT 2019

BCIS forecasts for the FM sector

The BCIS five-year (2nd quarter 2019 to 2nd quarter 2024) forecasts for the facilities management sector are:

• maintenance costs to rise by 21%
• cleaning costs to rise by 29% and
• energy costs to rise by 6% (based on annual averages 2018 to 2023)*.

Maintenance costs

Maintenance costs, as measured by the BCIS All-in Maintenance Cost Index, rose by 5.8% in the year to 2nd quarter 2019. The annual rate of growth in costs is expected to fall to 4.3% in 2nd quarter 2020, and then remain at or slightly below that level for the rest of the forecast period.

Maintenance costs and inflation
Maintenance costs and inflation

Repair and maintenance (R&M) output is forecast to rise by 0.3% in 2019, 1.9% in 2020, 0.3% in 2021 and 2% per annum in 2022 and 2023.

Maintenance prices are forecast to rise by around 2% in the year to 2nd quarter 2020, followed by an annual increase of 4% in the year to 2nd quarter 2021. Over the final three years of the forecast period, with sharper growth in total construction output and increasing pressure from input costs, prices are forecast to rise by close to 5% per annum in the years to 2nd quarters 2022, 2023 and 2024.

Cleaning costs

Cleaning costs rose by 4.5% in the year to 2nd quarter 2019, mainly due to the increases in the national living wage (NLW). Costs are forecast to rise by 6.4% in the year to 2nd quarter 2020 and 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.

Energy prices

Energy prices are largely driven by the global market and taxes, and as such are not likely to be affected by the UK leaving the EU. However, a fall in Sterling will raise the price of imported fuel and energy. Sterling exchange rates remain depressed compared with the pre-referendum rates. It is assumed that they will stay depressed after the end of any transitional period, improving gradually thereafter. As they improve, prices for imported fuel and energy will fall.

Energy prices are expected to rise by 1.8% between 2018 and 2019, fall by less than 1% in 2020 and rise by less than 2% in 2021, 2022 and 2023.

There is still a great deal of uncertainty over the terms that will be agreed when the UK leaves the EU. It now remains to be seen whether an agreement can be reached between now and the end of October 2019, or whether an extension will be agreed.

While almost any outcome is still possible, BCIS will continue to produce forecasts based on three scenarios; these reflect 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, June 2019.

*Energy cost projections are based on annual averages. As the price of oil is key to the majority of energy costs, these projections are based on the 2018 Fossil Fuel Price Assumptions published annually by the Department for Business, Energy and Industrial Strategy (BEIS).