The Economics of FM: Wage Growth, Margins and the UK Outlook

Insights from the Pareto, HSBC and IWFM London Region Event

26th February 2026

On 26th February Pareto and IWFM London Region jointly hosted a discussion examining the economic pressures shaping the facilities management sector.

The session brought together perspectives from across industry, finance and the professional body community, with contributions from Andrew Hulbert (Pareto Vice Chair), Emma Wilks and Rob Brand (HSBC), and Joe Harrison (IWFM London Region).

The discussion focused on the economic environment facing service providers and clients, and the implications for people-intensive sectors such as facilities management.

Wage Growth and the Impact on FM

Over the past five years the UK has experienced the highest wage growth of any country globally. Much of this increase has been driven by government policy, particularly changes to the national minimum wage.

This trend is particularly significant for facilities management, which employs a large workforce with a high proportion of employees paid at or near minimum wage levels. Wage increases have therefore become a primary driver of rising service delivery costs.

Since 2020, the national minimum wage has increased by 46%, creating a material shift in the economics of labour-intensive service delivery.

Margin Pressure Across the Sector

While employment costs have risen sharply, the prices charged to customers and clients have not increased at the same rate.

This imbalance is placing pressure on margins across many industries. In facilities management the effect is particularly pronounced because margins are already tighter than in many other service sectors. FM is frequently treated as a commodity rather than recognised for the operational value it supports.

As a result, service providers are facing increasing costs that cannot always be passed on to clients, creating a growing gap between the cost of delivery and the price of services.

Additional Cost Drivers

Changes to National Insurance contributions have added further pressure. Recent policy changes have increased contribution rates while also reducing the threshold at which employers begin paying them.

For organisations employing large workforces this creates a compounded impact alongside rising wage costs.

The result is a challenging operating environment where cost pressures continue to increase while many clients remain resistant to service price increases.

The Outlook Towards 2027 and 2029

Looking ahead, these pressures are expected to continue.

Further tax increases are anticipated in 2027 and again in 2029, while interest rates are forecast to remain broadly at current levels. Wage growth is also expected to continue.

These developments sit alongside the next UK general election scheduled for 2029. The potential convergence of further tax increases, sustained wage growth and election-year political pressures would represent a highly unusual economic backdrop.

Implications for the FM Sector

Overall, UK wage costs have increased more than anywhere else globally, yet these increases have not been fully reflected in service pricing.

This dynamic is affecting many industries but is particularly significant for people-intensive sectors such as facilities management, where labour represents the largest proportion of service delivery costs.

The discussion highlighted the importance of recognising these structural pressures and understanding how they influence service models, pricing and long-term partnerships between clients and service providers.

Pareto would like to thank IWFM London Region and HSBC, along with Emma Wilks, Rob Brand and Joe Harrison, for contributing to an insightful discussion on the economic landscape facing the sector.