For this weeks Q&A, we spoke with Jeremy Campbell, the executive director of EMCOR UK about building resilience in the build environment. He offered us his insights from the perspective of workplace management and how the service provision has changed and adapted in times of hardship like the 2008 recession, and what the future holds.
Tell me what happened to the built environment sector in 2008?
Let’s remind ourselves why the last recession started. Our banking colleagues were not behaving themselves back in 2007, or rather the banking sector was unregulated. They were lending money and basing loans on what eventually became known as toxic assets, which led to the collapse or near collapse of several banks and hedge funds. Lehman Brothers. Northern Rock. BNP Paribas. Cheap credit basically tanked our economy. Inflation soared. Unemployment spiked. Interest rates skyrocketed. People hadn’t seen a recession like it since Black Wednesday in 1992. I don’t think people or businesses were prepared for it. For the built environment, it meant a massive drive towards cost reduction. Customers started to use phrases like, ‘We want more for the same, or we’ll move on’. They wanted the same service for less money. The onus was on FM firms to cut costs or lose business.
Some companies began decoupling with their nationwide service providers, instead opting to drive value in local economies. Others decided to break out of regional deals and go for big, global contracts, with the idea they’d reap synergy benefits. That was the start of some big players in facilities taking advantage of the opportunities that came along with the recession. We saw a lot of M&A, and a move to TFM, IFM and different operating models that were based around driving more synergies through the supply chain to reduce supply chain tension. So, that’s what I saw in 2008 and the years that followed. A challenging time and a lot of focus on cost.
What do you think will happen this time around?
Well, it will be interesting because amid those that have been there before, there’s a whole new generation who will experience recession for the very first time. This generation have had it pretty good. They’ve got used to the idea of close to unlimited credit, of having every single subscription for every TV channel and media platform, of being able to download or stream whatever they want or need in a heartbeat, of being able to buy a swish new car on finance, regardless of what level they are in their career, of placing an order one day and receiving it the next, of having two or three holidays a year, and so on.
Those expectations may need to be reset during this recession. So, the first thing I think we’ll see is a realisation that one can cut back on certain lifestyle choices without necessarily suffering as much as one would expect to. I don’t think that was the case back in 2008 because high expectations didn’t exist in the first place.
I think we can weather the energy crisis, particularly if we start thinking about embracing renewables across the United Kingdom. But our biggest issue this time around is productivity. The UK still lags behind France and Germany, by something like 18%. The economist Duncan Weldon was cited in the Stoddart Report back in 2016 – he said that a 1% improvement on UK productivity will put £20 billion into the UK national output, or £250 a year into the average wage bracket, or reduce the public sector borrowing requirement by £8 billion. So, we’ve had this productivity problem for a long time. And I don’t think this recession will help, nor will the ‘striking Britain’ mentality. We have to focus on productivity to get out of this mess. Meanwhile we’ll all have to tighten our belts, deal with some short-term pain, but with the knowledge there will eventually be a long-term gain.
What about the FM sector specifically? How can it deliver more value?
If we think about value as a combination of cost, quality service, customer experience, sustainability, people engagement and wellbeing, then I think facilities has the potential to deliver so much more than it is today. I think we’re on the cusp of redefining what facilities management is all about, and what facilities management players can offer and deliver to the market. I think we’ll see a shift away from pipes, wires and brushes, and more focus on supporting the superstars the industry employs, cultural change, carbon neutrality, nailing the basics, and going above and beyond to improve the experience. Technology will play a key part in this. It will make a positive difference if it’s embraced and used to support people engagement and experience, whether those people are employees, customers, or the general public.
What does delivering value actually involve and look like?
You can’t look at things in isolation. You’ve got to take the holistic view. And this is where I think facilities has struggled over many years. When FM operates in silos, it can’t achieve full macro value. It should be incumbent on the end user to ensure that they’ve got well qualified facilities professionals – who understand the world of facilities management – to derive the best value out of any partnership. The more we talk about value in terms of increasing people engagement, supporting talent attraction and retention, improving equality, diversity and inclusion, reducing absenteeism, presenteeism and staff churn, then the more we can start to change the value narrative away from the lowest cost per square metre to delivering a truly sustainable future.
Business is about people. It’s about connecting people together. It’s about asking – Can we work together? Can we trust each other? Can we build a relationship? Can we bring the best out in each other? If that’s the prerogative, rather than a race to the bottom, then I think we will create a much better world for our future.
What can small firms offer that big FM firms can’t and vice versa?
Smaller companies can be quicker, more agile, and better able to make fast paced decisions. They generally give you a highly personalised experience and make you feel like you’re the only customer in the world. They’re usually cost effective, too, because they don’t have the big corporate overheads that the larger firms carry. Conversely, though, they’re not as able to support the ESG agenda, because they’re not necessarily going to be able to invest in delivering social value, or in solutions to support environmental sustainability. Smaller players usually can’t operate internationally, either. They probably don’t or can’t sign up to global standards. They tend to churn people quicker as there aren’t always as many progression pathways – again, depending on the growth trajectory of a given firm. And, although resilient, they are generally more vulnerable to economic changes.
The big players might be a bit slower, with larger overheads, which will have a bearing on the fees they charge, but they’re generally more financially robust. There might be more wiggle room to squeeze margins but at the same time they have to listen to and accommodate shareholder demands so profitability will always be a factor. With strong balance sheets comes more fiscal control, and with that customers can potentially enjoy more investment, knowledge, and access to talent. Bigger firms also tend to be better equipped and resourced to support the ESG and carbon neutrality agenda. But, as with anything, it depends on the company in question.
In recession, do you think it’s likely the customer will push social value and paying a decent and fair wage over cutting costs?
If you’re an ethical business, with the right set up and the right desire to shape, support and change the world, then you’re going to pay the living wage. Even though we’re in recession, companies will continue to do that. Because setting people free from a poverty trap is the right thing to do. Paying the living wage will also help stimulate the economy.
The social value side may slip as companies begin to feel the pinch. There may be less time and money to go above and beyond when it comes to supporting local economies and communities. That’s where the recession will bite.
It’s a candidates’ market. The war for talent has never been fiercer. Recessions usually see a spike in unemployment. Do you think that will happen this time?
Projections by the likes of the Office for National Statistics suggest there will be an increase in unemployment. We may see a slowdown in spiralling wage expectations and wage demands but other than that I think the war for talent is here to stay. In the FM world, so much talent is leaving the profession; people are looking for alternative careers because it’s not just about pay, it’s about working conditions and benefits, and I don’t think our sector has cracked it yet.
We need to promote the benefits of FM as an industry. It can offer an interesting and diverse career, with so many pathways to explore, particularly as we professionalise and adopt technology to support smart buildings and cities. That will help attract new people into the profession, but we have to work on FM’s image first.
Environmental sustainability is a hot topic. More firms in the built environment are committing to the cause. Going ‘green’ can be costly; investment is required and although ROI will be reaped in return, it takes time. Do you think the recession could curb or accelerate progress?
FM will play a massive role in helping companies achieve carbon neutrality by 2050. The world has to cut greenhouse gas emissions before the end of this decade. It has to. We can’t allow short-term economic stress to get in the way of the mission critical climate policy, or our transmission to renewables.
Check out the previous blogs in our series: