Survival strategies for contaminated land consultants

How environmental consultancies are holding up as their traditional, biggest fee earner bears the full force of recession

The evisceration of the housebuilding sector and shrinking volumes of corporate transactions have hit contaminated land practices hard. Many have laid off significant numbers of staff, while some are implementing three-day weeks to avoid lay-offs where they can. Others have redeployed staff to areas less affected by the downturn or are looking to public sector work to provide a respite. Survey results published in the latest edition of Environment Analyst Market Briefing reveal how these stresses are manifesting for consultancies active in the field in terms of contracting fee income, declining contract values and rising pressure on margins.

Contaminated land has been an excellent earner for environmental consultancies during the boom times when development was charging ahead, government targets for 60% of homes to be built on brownfield land exceeded year after year and a furiously healthy stock market driving mergers and acquisitions, with attendant due diligence work.

The results of Environment Analyst’s first benchmark survey of the environmental consulting sector suggest that contaminated land continued to be one of the largest service areas last year, accounting for over 17% of the total UK market. However, it was the only major discipline for which fees earned were shown to be decreasing on a year-on-year basis, with project income down for around half of the survey respondents active in this area. Project fees remained flat for a further 20%, while contaminated land practices that continued to see growth were in the minority.

While demand has been severely curtailed in the private sector, many consultancies are now looking to publicly-funded projects to pick up some of the slack, although there is still very little work to go around. Furthermore, bidding for central government and local authority work brings its own complications.

Environ principal consultant Andrew McVey says: “We’re seeing more firms – including ourselves – going after the public tendered projects, either local authority work or related projects for government bodies. It’s definitely a sign of the times."

Alistair Kean of IKM Consulting agrees that “the public sector is picking up the slack to a certain extent,” but cautions “there’s a limited amount of spend and there are definitely real budgetary constraints”. Another concern is that what little government work is coming through is competitively tendered, which means “multiple consultancies going for the same jobs”.

The consensus seems to be that environmental consultancies will need to be prepared for the market situation to remain at the current status quo or even worsen during 2009, but there are reasons to be hopeful that a recovery will begin in 2010.

Steve Hobbs of Enviros believes that even when the development market picks up, there could be a lag in the system, as landowners focus on sites that have already been remediated for housebuilding first. “I suspect it will be twelve months before we see a substantial upturn,” he says. “But it could be even longer before we see a lot of new sites coming forward.”

• Download Environment Analyst Market Briefing for our full report on contaminated land consultancy trends

• Environment Analyst Market Briefing April/May issue