Brexit poses uncertainty, opportunity for Britain's environmental consultants: report
The UK's Brexit vote is expected to have a significant impact on the nation's environmental consultancy sector, with market growth in 2016 estimated to be almost half what it was in 2015 due to the uncertainties looming over client investment decisions.
According to a new report from market research firm Environment Analyst, the environmental consultancy market recorded its fifth consecutive year of growth in 2015, with an 8.7% year-on-year increase – buoyed by a surge in demand for support from businesses in the infrastructure and development space.
But this growth rate is anticipated to come out at a more modest 4.6% for 2016, which Environment Analyst says “will undeniably have a critical impact on the continuing health of the environmental services industry”.
Co-author of the report Liz Trew said: “In making these market growth projections we have taken a cautiously optimistic view with regards to Brexit.
“For UK environmental consultancy practices, there will be ramifications in terms of their EU national staff and access to EU work opportunities, as well as risks associated with the broader economic implications – particularly regarding inward investment trends and national infrastructure funding – and the potential for environmental regulations to be watered down.
“Yet, at the same time, there will be significant opportunities for consultancies to help the UK Government reform laws relating to land management, farming and fisheries, waste management, ecological protection and more; and in keeping their clients informed of these changes.
“So exciting, if uncertain times ahead for UK environmental consultants.”
An increase in support services required for complex infrastructure projects – particularly in the energy and transport sectors – together with a return to growth in demand from the public sector helped to increase the environmental consultancy market value to £1.57bn in 2015, according to the report.
These current market dynamics - with the growing importance of major infrastructure projects requiring long-term multidisciplinary input for identifying, managing and monitoring environmental impacts - favour the larger operators: collectively, the 30 biggest environmental consultancies surveyed in the report achieved a collective increase in revenues of 10.1% in 2015. These larger consultancies also saw their average contract value increase by 3% year-on-year to £27k, while the total volume of contracts they serviced rose by 6.8% to 40,300.
Conversely, the smaller consultancies surveyed – those with revenues of less than £10m –experienced a 20% fall in average contract value in 2015 to £9.5k, indicating that these smaller firms are struggling to compete on the larger infrastructure contracts.
Four core environmental consultancy disciplines continue to make up over half of the demand for business in 2015: environmental impact assessments and sustainable development (16.4%); contaminated land/remediation (14.6%); ecological/landscape services (12.9%); and water quality & resource management (12.4%).
Interestingly, climate change and energy services also saw double-digit growth (12.2%), in 2015, benefiting from the momentum generated in tackling climate changing in the build-up to the successful COP21 climate talks in Paris; as well as the introduction of the Government’s Energy Savings Opportunity Scheme (ESOS), and large-scale renewable energy developments.
The Environment Analyst study concludes that the UK’s environmental consultancy sector is forecast to grow by an average of 3.7% per annum between now and 2020 to reach £1.83bn, meaning that an additional market space of more than £258m will be created over the next five years. At this rate, the market would finally surpass the pre-recession peak value of £1.71bn achieved in 2008.
The UK’s top 10 environmental consultancies (by revenue)
1) RPS Group
4) WSP | Parsons Brinckerhoff
6) Mott MacDonald
7) Environmental Resources Management
9) RSK Group