Environmental consultancy contracts from the public sector fell 7.9% in 2014 as a result of government cuts, according to market research data.
In its annual report on the state of the UK environmental consultancy market, Environment Analyst found that revenues from the public sector in 2014 stood at £293 million, equivalent to 20.3% of the total market, down from around one third in 2010.
AECOM, Atkins, Jacobs, Mott Macdonald and Ricardo Energy and Environment were identified by the analysts as the firms most dependent on public sector contracts.
However, the public sector decline was more than offset by increased spending on consultants by private companies and regulated industries, which together saw 4.4% year-on-year growth. These account for almost 80% of the total spent on environmental consultancy services in 2014.
Demand was particularly strong from the construction, property and transport sectors, which grew 13% year-on-year, representing the second year of double-digit growth from these areas. The analysts said this growth was driven by a recovery in housebuilding and infrastructure improvements, with WSP Parsons Brinckerhoff, AECOM, Mott Macdonald, Arup and Atkins the main beneficiaries.
The top five firms in terms of overall UK environmental consultancy market share in 2014 were AECOM, RPS Group, Jacobs, Environmental Resource Management and Arcadis. AECOM’s $4 billion takeover of US-based engineering group URS Corporation, which created a UK environmental team numbering 900, saw it usurp long-standing leader RPS.
Demand for environmental impact assessment and related services fell slightly in 2014, with growth down 0.5%, compared to increases of 4% and 19.5% in 2013 and 2012 respectively. National infrastructure projects, including the HS2 high-speed rail link, the Hinkley Point C nuclear power station and Triton Knoll offshore wind farm, have heavily influenced growth in this area, said Environment Analyst, but numbers of such projects have tapered off, cooling the market.
Waste management services suffered the most severe decline of the 12 core service areas assessed by the analysts, falling 10.7% in 2014. The sector has failed to regain momentum after the recession and the end of large PFI-funded projects to build recycling centres and waste treatment facilities to divert rubbish away from landfills to meet EU targets, the analysts said.
International project work also fell, with revenue from overseas work declining to 11.5% of all expenditure, compared to 13.5% in 2013.
However, revenue from environmental and sustainability strategy and policy work grew by 16.2% in 2014. This was followed by ecological and landscape services, which experienced a 10.5% increase, and air quality, which grew by 7.4%.
The overall environmental consultancy market is forecast to grow by an average of 3.6% per year between now and 2019 to reach £1,722 million, the analysts forecast.
“At this rate, the sector would finally surpass its pre-recession peak value achieved in 2008 some ten years later in 2018,” according to Liz Trew, editorial director at Environment Analyst.
She predicted that five core areas would make up over two-thirds of the additional £278 million in new market revenues to be created by 2019: climate change and energy, contaminated land; EIA, ecology and water resources management.
Furthermore, environmental consultants could benefit from new markets in biodiversity offsetting, river restoration and natural flood management, the mandatory carbon reporting and the broadened scope of energy efficiency requirements placed on businesses under the energy savings opportunity scheme, she said.
