A Skillset report has warned the facilities industry that it lacks business and management skills and must change to survive.

The report, A Strategic Review of the Facilities Sector, was commissioned by the sector skills body.

It was conducted by Hugh Waters, a facilitator of training programme First Post and formerly managing director of Molinare (between 1998 and 2002). It took the views of 20 key companies.

The report argues that a few years ago, facilities management would have been able to grow a loyal client base using simple sales-related skills, but claims the situation has now changed dramatically:

"With deflating budgets, fragmentation of the market and fundamental changes to the technology and economics governing the industry, old relationships are frequently dropped in favour of price or workflow efficiencies.”

To compensate, senior management skills should now include understanding business innovation, the global business environment and how to develop effective marketing.

The report offers a strategy to train managers for the future using the press and peers, short workshops and online. It says that high-level training needs to be carefully orchestrated and that senior-level training should be “a recognition of managerial ability, not its absence”.

Other changes within the sector can be seen as both a threat and an opportunity. Technology is cheaper and evolving, the industry is diversifying and there is a burgeoning overseas facilities market - in India and eastern Europe particularly - the report said.

One report respondent said of the Indian market: “There is a bloody great train coming towards us and if we don't do something, we're finished.”

The report adds: “If the UK's facilities industry cannot work out how to drive opportunities, it will be crushed by others who can.”

To help the sector take advantage of the opportunities, Skillset will prioritise and action approximately 25 problems. The actions include the establishment of greater links with education (to enable better technology training); the development of a skills passport for freelancers in multiskilled sectors such as physical effects, studios and OBs; and Skillset having a “brutally honest” relationship with facilities.

Skillset facilities sector manager Triston Wallace said: “The sector is divided, some companies are deploying business acumen and diversifying successfully. Others, which are not seeking alternative revenue streams or ways of working, may not survive.”

The report is due for release following a two week consultation period.

Skillset has worked closely with the IABM, IVCA, UK Screen and Bectu on this report and plans to continue to develop ties.

According to the report, the facilities sector is made up of 1,100 companies employing about 17,000 people and comprising outside broadcast, studios with equipment, hire companies, post-production, visual effects and physical effects.