THE MARKET

• Market overview – estimates of total market size in 1998 and forecasts 1999-2002, estimates market penetration, breakdown of market by end-user sectors, key influences eg out-sourcing, multi-service contracts, UK construction trends, government legislation.
• Analysis of key end-user markets for contract cleaning – commercial offices, healthcare, industrial, food hygiene, retail, leisure, central government, transportation, local authority/education – key trends within sectors.
• Market size estimates for each end-use sector in 1998, forecasts for 1999-2002, market penetration, leading contractors in key markets, growth sectors etc.
• Mix between contracted-out and in-house within each sector.

CONTRACTOR ANALYSIS

• Market structure – high level of fragmentation, growing rationalisation.
• Market share estimates for leading 20 cleaning contractors.
• Review of leading contract cleaning companies, facilities management companies and specialist healthcare service groups, areas of specialisation etc.

PRODUCTIVITY

• Analysis of key factors affecting productivity eg working hours, employment legislation, employee turnover, equipment use.
• Analysis of input factors ie labour, equipment, materials - changes in mix.
• Changes in employment structure - trends towards full-time employment.
• Trends in cleaning regimes - output led specification, daytime working.
• Impact of trends in contract cleaning on powered machinery requirements eg rising labour costs.

DISTRIBUTION & SUPPLY

• Analysis of factors impacting on growth in market concentration - multi-servicing, mergers & acquisitions, impact of government legislation.
• Analysis of distribution channels.
• Estimates of size of UK markets for powered cleaning machines, cleaning chemicals & manual cleaning materials – key trends, influencing factors, future prospects.
• Details of key manufacturers and importers/distributors - company size etc.

KEY INFLUENCES

• Outlines of recent key trends in UK construction market by key sectors.
• Outlines and trends in UK market for floor coverings - estimates of market breakdown by material type by volume in key end-user sectors.
• Relevant aspects of key pieces of legislation - 'Best Value', changes in TUPE etc.

The report contains over 100 pages of ORIGINAL research on the UK Contract Cleaning Market and provides a comprehensive analysis of its current and future development.

Since the recession of the early 1990’s companies and public sector organisations, in the UK, have been contracting out peripheral non-productive functions, the aim being to minimise labour costs and management time on low-priority areas, and to obtain improved quality of service, provided by companies specialising in cleaning and allied services.

The contract cleaning industry has undergone rapid growth during the 1990’s, exceeding the average growth rate in the UK economy, although the market is still relatively immature. It is estimated that in 1998 the contract cleaning market was worth around £2.65 billion, and is expected to show strong growth over the next three years.

The main ‘driving’ factors are:

• Forecast underlying growth in GDP until at least 2004.
• Increases in construction output.
• Continued outsourcing in both the public and private sectors.
• Trend away from single to multi service business services contracts.
• Impact of Government and EU legislation on contractors’ costs.
• Higher expectations from the public for hygiene and cleanliness in public places.

As many users of contracted support now prefer to negotiate with single multi-service rather than several single service contractors, higher-value contracts will stimulate overall market growth

In certain end-user sectors, market potential for cleaning contractors is near saturation, particularly commercial office, retail, leisure, transport and Central Government. Growth in these markets, therefore, is largely dependent upon increases in construction output. In 1998 there was a drop in the growth rate for orders of new retail and office construction, suggesting there may be a slowing down in demand for contract cleaning in the latter part of 2000. However, extensive developments at many UK airports over the next ten years is anticipated to stimulate an annual increase in contract cleaning output of around 12-14 percent in the transport sector. The leisure industry will also stimulate strong demand for contracted services in the short term, with output likely to be above the industry average.

In other end-user sectors the main growth stimulus is likely to be a rise in the level of outsourcing, combined with the trend towards multi-service contracts. This is expected to be most prevalent in the public sector, where around 65 percent of contracts are still undertaken in-house. Tight budgeting requirements among NHS Trusts is likely to generate increasing demand for healthcare support services specialists and facilities management companies, illustrated by the recent awards of several very large multi-site contracts.

In the local authority education sector it is expected that there will be a rise in the number of multi-service contracts, while ‘Best Value’, in theory, ought to favour external contractors as local authorities will be expected to award contracts on the basis of quality and not the lowest tender. Consequently there should be a steady growth in output in this sector over the next few years from around 3 percent to 8 percent. Similarly, the food hygiene sector is expected to show steady, if relatively slow growth, as outsourcing in the food processing sector increases, in line with many Western European countries.

While further construction output and increasing levels of outsourcing are expected to provide opportunities for growth, traditional contract cleaning companies face several threats.

• As barriers to the contract cleaning industry are low, there will be an increase in competition from facilities management companies and contract catering firms. At the moment these companies generally have higher profiles in the public than in the private sectors.
• The National Minimum Wage (NMW) is more likely to have a greater impact, in the short term, on smaller than larger contractors, which, in general, have been paying above the NMW for a few years. Until its introduction, smaller contractors had been able to compete on price through lower labour costs, but now this advantage has disappeared.
• The trend towards multi-service contracts is certain to weigh in favour of larger contractors. This factor, together with a number of major acquisitions during the last two years, is expected to lead to a further polarisation of the market. These include Broadreach’s purchasing of Bateman Cleaning Services and Compass Cleaning’s acquisition of West Riding Cleaning.

The largest twenty contractors account for approximately 37 percent of the market, with the leading four players – Rentokil Initial, OCS Group, ISS UK and MITIE Group taking a combined share of around 25 percent. The remaining 63 percent is shared among the other 7,000 + contractors, the majority of which generate annual turnovers below £1 million.

Increasing competition for fewer higher-value contracts, combined with demand for higher productivity and the impact of various pieces of legislation, are generating the need for improvements in employment structure and operations. Already, there are signs of a slow shift towards full-time labour, perceived as more cost-efficient than part-time employment. Other factors weighing in its favour are that the market for part-time labour is becoming increasingly competitive, and that ‘round-the-clock’ working in some end-user sectors necessitates the use of full-time workers on day shifts.

Demand for higher productivity from customers is creating demand for more productive cleaning machines. Higher labour costs are expected to force many contractors to reduce labour input and increase investment in machines, especially robotic floor cleaning equipment for buildings with large expanses of floor areas and for multi-function cleaning machines which can efficiently perform at least two stages of floor cleaning in one pass.

The UK market for industrial cleaning equipment and chemicals is estimated to be worth around £670 million msp. The largest sector is industrial cleaning chemicals, which accounts for around 60 percent of sales, i.e. approximately £400 million msp. However, this figure is higher if sales of domestic cleaning chemicals used for commercial applications are included. Leading suppliers include DiverseyLever, Johnson Professional, Henkel Ecolab and Kleencare Hygiene although owing to high degrees of fragmentation in the product and end-user markets it is difficult to establish specific market shares.

Sales of powered cleaning equipment constitute around 30 percent of the total market, about £200 million, while the remaining 10 percent, £70 million, is accounted for by manual cleaning materials, although there is some overlap between domestic and commercial use. The leading suppliers of powered floor cleaning equipment in the UK include Numatic and Nilfisk-Advance, the largest players in the industrial vacuum cleaners sector; Alto and Karcher, the dominant suppliers in the market for pressure washers plus Tennant, Dowding and Plummer, Hako Machines, Wetrok and Truvox, leading suppliers of larger items of hard floor care equipment.

The market for manual cleaning products is dominated by a handful of manufacturers, each with strengths in differing product sectors, these being Ramon Knitting, Harold Watson, Robert Scott, Scot Young Research, Contico Manufacturing and Numatic International.