The UK environmental consulting (EC) market jumped 6.3% to its highest-ever value of £1.65bn in 2016 and is set for a further increase of 4.5% when figures are finalised for 2017, according to Environment Analyst’s newly-published annual research report (Figure 1).
Strong growth in infrastructure & development support and a sustained recovery elsewhere have helped lift the UK EC market well above its previous pre-recession peak. EA's assessment also reveals how the recent wave of industry M&A is consolidating and shaking up the rankings of the leading service providers.
The report is based on the financial statistics and detailed company profiles of the leading peer group of thirty EC practices in the UK, as well as Environment Analyst’s wider annual company survey results. It found that the ‘Top 30’ together account for a dominant 71.6% share of the total UK EC market (based on gross revenues in FY2016 before sub-contracted fees). Seven of the Top 30 achieved substantial (>20%) growth in their UK EC turnover during this period (including both acquisition-related and organic growth), while a further five saw growth in the region of 10-20%. Only six of the Top 30 saw contraction in their UK EC revenues.
The top five environmental consulting firms – RPS, WSP, AECOM, Arcadis and Jacobs – presently lay claim to a combined share in excess of 29% of the market total, and this is set to grow further when CH2M’s UK EC revenues are are also factored into Jacobs’ figures following its recently completed ‘transformational’ takeover of its US bedfellow (EA 05-Jan-18). The increasing dominance of the Top 5 is all the more impressive when considering how things have moved on in the last decade, at the beginning of which the Top 5 held a joint market share of just c17% (Figure 2). RPS is the only member of the ‘class of 2008’ still to hold its place at the very top of the table given that Halcrow and AEA both no longer exist (having been acquired by CH2M and Ricardo respectively in the interim), while Atkins and ERM have fallen down the pecking order.
Merger & acquisition activity led by, and impacting, firms within the Top 30 has played a huge part in determining the latest rankings and market shares as presented in the new edition of the report, with six of the firms being acquired outright in the last 24 months. In 2016, RSK bought ADAS, Stantec aquired MWH and WSP snapped up Mouchel, then last year we saw the entry of three completely new names to the Top 30 - namely Wood, SNC-Lavalin and the Japanese-based CTI Engineering - via their respective acquisitions of Amec Foster Wheeler, Atkins and Waterman.
This latest edition of EA’s flagship UK market assessment series also welcomes another two new additions to the Top 30 (see full list in Figure 3), with Peter Brett Associates and Anthesis Group entering the fray for the first time with their individual UK EC revenue totals exceeding the £10m threshold. While PBA has demonstrated a consistent performance in recent years thanks to its strong capabilities in EIA services and wider planning business roots in housing and development, Anthesis’ 2016 purchase of energy efficiency and carbon management specialist Sustain helped it reach this milestone.
Sectoral trends and outlook
Solid growth seen across all client sectors - but from the infrastructure & development and regulated industries in particular - helped boost the total value of the market by almost £100m in 2016. Meanwhile in terms of work areas, consultants reported strong demand for water quality & resource management (with 10% year-on-year growth), ecological/landscape services (+8.4%) and EIA & sustainable development services (>15%). However, the Top 30’s figures indicate a marked slowdown in demand for contaminated land services, while those associated with corporate environmental management/compliance and sustainability advisory/policy were shown as flat or in decline.
EA’s market projections indicate that overall market growth is expected to continue in 2017 and into 2018, albeit at a slowing rate as the UK’s bulging pipeline of infrastructure opportunities and growing emphasis on house building are weighed down by Brexit jitters (Figure 1). Concerns relating to investor confidence and the sustained performance of the economy leading up to and immediately following the UK’s departure from the EU has seen the five-year growth forecast to 2021 lowered to a CAGR* of 2.5%, compared to 3.7% as reported in the previous market assessment published a year ago.
*compound annual growth rate
Other key findings in EA’s latest UK EC market assessment include:
- Environmental consulting is a good place to be for the multi-service providers - with the majority of the Top 30 EC practices forming part of much larger multidisciplinary design and engineering firms, it is interesting to note that the Top 30’s combined EC revenue growth performance of 6.7% far outperformed their combined wider group business growth of just 1.0%.
- Headcount statistics show the Top 30’s EC staff contingent grew 5.8% in 2016 to reach a total in excess of 11,600 FTEs, but overall group staff numbers declined by 3.0%.
- The average UK EC contract value increased by 5.5% to £29.4k for the Top 30 although growth the absolute number of contracts was slower and totalled approximately 40,400 for the peer group. Meanwhile, SMEs (achieving UK EC revenues < £10m) saw average project values at £7.3k.
- International work remains important to the Top 30 with overseas projects accounting for a consistent 11% of the revenues generated by their UK-based EC teams. Overall global EC revenue for the Top 30 – including all domestic and non-domestic activities – grew by 6.5% to £9.7bn in 2016.
- Private sector (including regulated industry) revenue accounts for 81% of the market compared to 19% from the public sector, which is a significant change from the UK EC industry’s make up pre-recession when government sector sources accounted for more than 30% of market total.
- Demand for EC services from the financial and services sector saw strong growth in 2016, up 13.6% year-on-year. However, in terms of gross value added it was the infrastructure & development and regulated industry sectors which acted as the primary engine for growth with almost 60% of the c£100m market increase in 2016 coming from these areas.
- Overall UK EC market expected to reach £1.87bn by 2021, up 13% from 2016 in spite of Brexit risks, with EA’s unique market assessment report pinpointing where this growth is expected to come from.
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