Outsourced Security Guarding Services: UK market profile and forecast

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Published: February 2013
Pages: 54
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Description

About this report

The security industry has been touched by several important trends, some of which are important across business services markets with others being related to even broader trends. These include:
– Application of new technology such as CCTV and consequent reengineering of services
– Growth of integrated FM contracts
– Government spending cuts and outsourcing of services such as prisons and policing support to achieve savings
– Increase in levels of security in airports and other sensitive locations
– Growth of internet retailing and impact on the high street

This market report reviews the provision of outsourced security guarding services in the UK. We quantify the security market size, historical growth rates, segmentation patterns and levels of industry profitability while reviewing key factors behind these figures. We also carry out an in-depth analysis of the relevant drivers of industry growth – in particular trends in prisons and policing, air travel, retailing and development / deployment of CCTV and other security technologies – setting out historical trends and available forecasts. Our forecast for industry growth by segment is based on this analysis of historical trends and our understanding of growth drivers.

In assessing the prospects of the security market, it is important to think through what each of these trends means for the industry and see how, and by how much, it may change in the light of them. That is the main objective of this report.

Who is it intended for?

Security service providers
Manufacturers of security equipment
Purchasers of security
Facilities management groups
Investors
Banks
Consultants
Governments and regulatory bodies

What are the sources and methodology?

This report is based on:
– Interviews with senior-level contacts across the security market
– Extensive research into published industry sources
– In-depth analysis of the macroeconomic environment and relevant security market drivers
– Financial analysis of the accounts of companies in the industry
– Our own experience of advising both companies and investors in security businesses and other business services areas.

Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions.

Market forecasts have been constructed using simple assumptions which are clearly stated. Supporting evidence is provided for our assumptions but readers can easily flex them to model alternative scenarios.

Executive Summary
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Market growth and drivers
The outsourced security guarding services market is approaching £5bn in size, having grown steadily in recent years.
Retail, airports and prisons have accounted for most of the growth with increased emphasis on airport security in the post-9/11 world and outsourcing of prison contracts being important factors
Technology such as CCTV, continues to be deployed extensively, both as a complement to and a substitute for, human guards
In 2012, the Olympics represented a significant additional one-off requirement leading to temporary growth in the security market.
Crime rates have fallen, although public perception and fear of crime appears not to have done. As a result, demands for tougher sentences are widespread and prison populations have increased, with the UK incarcerating more of its population than most other European countries

Operator trends
The market for manned security remains relatively fragmented. In our research we have analysed the performance of 17 of the largest UK service providers, which we believe account for 75% of the security market – with the remainder being served by a long tail of smaller providers. The industry accreditation body, the SIA, has over 700 members.
There has been significant convergence between security and facilities management. Several of the leading players in the industry, such as G4S, MITIE, Vision, Serco and Sodexo provide security has part of a much broader range of services.
For FM companies the benefit is clear: adding security revenues can increase revenue per customer and hence drive profitability.
Benefits for customers are less clear as there are few reports of significant operational reengineering to remove costs by integrating security and other services on the ground – although integration of local management at smaller sites is frequently reported
Some leading providers, such as Securitas and Corps, continue to focus on security as a standalone service.
Industry margins have held up very well with price increases being achieved despite the economic downturn and wage inflation being kept in check.

Outlook
While the core manned security market is somewhat mature, growth is likely to come from increased outsourcing of government services such as the operation of prisons and provision of certain police services which are not in the front line.
In addition, airports are likely to remain a key source of growth. Economic recovery is likely to accelerate passenger growth and new technologies are constantly being developed and deployed.
The nature of security market growth, with the most attractive opportunities appearing to be in areas where there are large contracts, implies future market consolidation. [/restrict]

Contents

The UK security guarding services market - 7
- Security market definition
- Regulation
- Customers

Security market size and growth - 9

Security market drivers - 10
- Discussion of drivers
- Drivers and their impact:
- Macroeconomic factors
- Crime rates
- Retail sales
- Air travel
- Prison and custodial services outsourcing
- Police outsourcing
- Pricing
- Impact of the Olympics

Security market trends - 22
- Bundling and IFM packages
- Adoption of technology (eg CCTV)

Competitive landscape - 24
- Comparison of leading companies
- Profiles

Forecasts - 46
- Key drivers forecast
- Security market forecast
- Risks to the forecast

Appendix - 54

List of figures (UK Outsourced Security Guarding Services Market Report)

1.Security market size / £m
2.UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP / % annual changes
3.UK Inflation: Consumer price index and GDP deflator / % annual change
4.UK Household disposable income and retail sales / % annual change
5.Internet sales: value and as % of all retailing / £bn, %
6.Number of total crime (millions) and property crime incidents (thousands)
7.Perception of crime / % saying there is more crime than two years ago
8.UK airline passengers / m
9.Airport security spend / £m
10.Value of outsourced prison contracts / £m
11.Prison population in England and Wales / '000
12.International prison population / '000
13.Cost per prisoner, per year (most recent year) / £
14.Number of police officers in England Wales / '000
15.Minimum wage / £
16.Security companies revenue (most recent year) / % of total security market
17.Leading operators historical revenue trend and security market growth / %
18.Number of ACS approved companies
19.Pre-tax profit margins (most recent year) / %
20.Leading operators pre-tax profit / %
21.Leading operators revenue per employee / £'000
22.G4S summary financials
23.MITIE Total Security Management UK summary financials
24.Securitas Security Service (UK) Limited summary financials
25.Vision Security Group Limited summary financials
26.Advance Security UK Limited summary financials
27.Corps of Commissionaires Management Limited summary financials
28.The Shield Guarding Company Limited summary financials
29.TSS Total Security Services Limited summary financials
30.Ultimate Security Services Limited summary financials
31.Axis Security Service Limited summary financials
32.First Security (Guards) Limited summary financials
33.Carlisle Security Services Limited summary financials
34.CIS Security Services Limited summary financials
35.Kingdom Security Limited summary financials
36.UK nominal GDP, inflation (GDP deflator) and real GDP / % annual changes
37.UK Consumer Price Index and GDP deflator / % annual change
38.UK real household disposable and median income / % annual change
39.Forecast value of outsourced prison contracts / £m
40.Projected number of police officers in England Wales forecast / '000
41.UK airport passenger number forecasts / million
42.Security market size forecast / £m

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