Best & worst performers in UK enviro consultancy named

A new report reveals exactly which consultancies are aggressively cementing their positions and which are losing ground

Five companies have each added at least £30 million to their top-line core environmental consultancy revenues in the UK over the last five years, according to the latest research report from Environment Analyst. The report also identifies several firms that are lagging well behind their peer group in terms of financial performance.

Top of the rankings is RPS Group, which added more than £40 million (+91%) to its core UK environmental consultancy business during the period 2003-08. Jacobs Engineering, Mouchel Group, Aecom (Faber Maunsell) and RSK Group complete the list of five fastest-growing firms in terms of absolute sales growth during the five-year period.

All of these firms have been highly active in mergers and acquisitions, particularly RPS, which completed no less than nine deals in 2008 with a combined value of more than £35 million. The plc’s strategy is to seek out smaller, like-minded businesses that are market leaders in niche, high-margin, business areas. RPS pulled off one of the sector’s biggest international deals this year to date, with the purchase of Australian environmental and landscape consultancy Conics for £31.3 million.

According to Environment Analyst’s market assessment, RPS is the overall UK environmental consultancy market leader, with sector sales of £85 million last year – equivalent to a market share of 6.0% (up from 5.5% in 2007).

Of the top thirty environmental consultancy firms identified in the report, only one company has seen its UK environmental consultancy turnover contract during the last five years. The company in question is ADAS, the Warrington-based rural development specialist and former government advisory body, privatised in 1997.

ADAS' sales have dropped by almost 19% since 2003. This is partly a reflection of internal rationalisation and restructuring of the business, however the consultancy has also suffered on account of its over reliance on Defra-funded contracts (Environment Analyst 28-Apr-09).

Defra has recently reined in its consultancy spend, with AEA Technology another casualty of this trend. The sector’s number-two firm, AEA’s UK turnover dropped by 18%, from £76.4 million in 2007 to £62.7 million last year. However, the climate change and energy specialist's newly-acquired US business, Project Performance Corporation, helped boost group performance, with AEA’s total turnover for the year ending 31 March 2009 up 16% to £93.7 million (Environment Analyst 11-Jun-09).

Looking at AEA's five-year growth trajectory, the consultancy has outperformed the UK environmental consultancy sector as a whole, growing by 79% compared to the sector, which increased by 76% for the period 2003-08.

Beyond ADAS, two other companies are identifiable as slow movers in terms of UK environmental consultancy revenue growth during the last five years. These are URS Corporation and Enviros, which have grown by just 14% and 25% respectively.

Finalised data for last year shows that growth in the UK environmental consultancy sector slowed from a booming 15.3% in 2007 to a moderate 6.5% in 2008, to stand at £1,418 million.

Market growth is forecast to be flat in 2009, with environmental consultancies now operating in an unfamiliar trading environment characterised by declining ‘discretionary’ spend amongst major corporate clients, deferred project pipelines, decreased order book visibility and growing uncertainty about work coming from the public sector, with government spending cuts forecast and a general election looming.

“With reduced staff utilisation feeding straight to the bottom line, firms are faced with a difficult trade off,” states the report. “Do they stomach a temporary drop in profit (or even a loss) in order to retain talent in preparedness for the upturn or act swiftly to protect margins at all costs?” The ownership structure of the company and shareholder expectations are crucial factors in this respect, it adds.

Firms best positioned to ride out the recession are those with significant capabilities in climate change, energy and waste management consultancy, as well as those with strong ties to regulated industries, it concludes. Those with a profitable international dimension and access to diversified end markets are also in a stronger position.

The data and conclusions presented in Environment Analyst's market assessment of the UK environmental consultancy sector is the culmination of several months' in-depth analysis, which included a detailed survey of consultancies, interviews with more than 50 sector representatives and interpretation of data collated from a variety of sources, including annual reports and accounts.

• The full market assessment, published September 2009, is now available to Environment Analyst’s Market Intelligence Service subscribers or to purchase as a standalone report.

• Market Assessment of the UK Environmental Consulting Sector 2009