UK enviro consultancy sector contracted 8.4% in 2010

Public sector spending cuts account for 70% of decline

A decline in the size of the UK environmental consultancy market occurred in 2010 for the second consecutive year, according to research undertaken by Environment Analyst. The 8.4% contraction brought down the value of the sector by £113 million, to £1.2 billion.

The primary cause of the market's contraction were cuts in public sector spending prompted by the UK government's programme of fiscal austerity. Data collected for Environment Analyst's annual UK environmental consultancy market assessment indicates that 70% of market contraction was the result of reduced public sector spending, with £79 million in public spending lost between 2009 and 2010. The remaining third of last year's decline was due to reduced demand from private sector clients.

More positively, there was increased spending on environmental consultancy services from regulated industries, such as energy and water companies. Regulated industries' collective spending grew by £14 million.

For this year, Environment Analyst forecasts just 0.5% growth, however, all indications point to strong, long-term drivers for further expansion in environmental consultancy. Until 2009, the UK environmental consultancy sector benefited from two decades of uninterrupted growth.

Climate change & energy at heart of consultancy services
Environment Analyst's research also examines changes in client demand for specific types of environmental consultancy. Despite a 12% decline in 2010, environmental impact assessment (EIA) remains the largest discipline by value, generating £168 million.

Contaminated land services are the second-largest area of activity for UK environmental consultancies, accounting for £159 million, down 3.4% on 2009. However, this represents a far more modest decline that the almost 25% drop recorded in 2009 (Environment Analyst 10-Jun-10), suggesting that the contaminated land sector is stabilising following 2008's sharp and sustained fall in UK residential and commercial property development.

Water quality and resource management-related work saw little change in terms of value, generating £147 million in revenue, and representing the third-largest discipline within UK environmental consultancy.

Whereas waste-related services used to be the fourth-largest discipline within UK environmental consultancy, last year saw climate change and energy services move into fourth position, generating work with a total value of £136 million. This change was due to an almost 12% decline in waste services revenue, which generated a total of £121 million. However, Environment Analyst research suggests there may be improved prospects on the horizon for waste-related consultancy services.

Sustainability services on the up
Last year's big winner was environmental and sustainability policy and strategy work, which grew by almost 15%. While the discipline remains a small one – generating in total £63 million – its strong growth is yet another indication that an increasing number of organisations are seeking assistance in developing and/or improving their response to the environmental and sustainability agenda.

This year, areas of growth are likely to be:

• ecology and landscape

• climate change and energy

• EIA and sustainable development

• environmental and sustainability policy and strategy.

Further job losses
Given the weakness of many parts of the UK environmental consultancy market last year, further job cut were made by many players. Just under 1,000 job cuts were implemented by the largest 32 consultancies, according to Environment Analyst data, representing an 8% reduction. This is a similar scale to the job losses made within the large consultancies during 2009.

This year, staff numbers within the UK environmental consultancy sector are expected to creep gently upwards, with half of large consultancies and a third of smaller consultancies reporting that they have been and/or are recruiting in order to boost the size of their workforce.

• Further information
• Environment Analyst news release