Last year was a boom year for civil engineering consultants, with combined fee incomes topping £10bn for the first time in history.
More from: Consultants File 2009: Market report
In 2008, even with workload in the last three months of the year dropping dramatically, companies replying to the NCE Consultants File questionnaire brought in fees of £10.33bn, up 20% on 2007 which in its own right was a boom year.
Staff numbers employed also ballooned to 171,886 – up from 156,423 but those numbers need to be taken with a pinch of salt, as they were staff numbers on 2 January. Since then consultants have been announcing between 5% and 10% job cuts on an almost daily basis.
Atkins chief executive Keith Clarke is expecting a big fall in industry capacity over the coming year. “I think the entire construction sector will lose 25% of its capacity,” he says, but stresses that engineering firms are more robust than the overall construction and house building industry.
“Companies with a strong local presence and strong balance sheet, that haven’t borrowed huge amounts and have good, strong technical skills will survive better than those that are highly diversified and more generalist,” he believes. “The great thing about engineering is that we are selling our judgement and that is why we may have more chance in the worst recession we will ever experience. Global recession is no reason to doubt the validity or need for good engineering design in the built environment.”
But Clarke points out that however much need there is for engineering, particularly with the need to rethink engineering to cope with climate change, everything will remain seized up until the banking crisis is finally resolved.
“The market globally is extremely difficult in the short term and will remain so until the banking system is re-established and working again,” he says.
Scott Wilson and current Association for Consultancy & Engineering chairman Geoff French agrees. “The banking sector has to resolve itself or it will constrain everyone’s growth. The success of the government drive to get money through the system is crucial.
“As businesses grow they need cash. We all get paid in arrears and it is unlikely in the current circumstances we’ll get clients to pay in advance! But we either change the way we are paid or get access to capital. The problems start when a company comes to the end of its arrangements with a bank because in this climate the bank is likely to be more difficult about the next line of credit.”
He continues: “The biggest concern is that banks will force people to reduce their overdraft. If they do that, a listed company might have to issue more shares; a private company has less places to go. I worry a lot for people traditionally working with the private sector, contractors and smaller firms.
“Smaller companies maintain their independence because they fill a niche, but when the good times are over the result could be some misery.”
Consultants File 2009: UK consultants fee income tops £10bn