But the report carries good news from the geotechnical consultant market in 2007 with average growth at 10.6%. However, 32% of firms saw sales decline.
Despite tougher trading conditions, Plimsoll's senior analyst David Pattison said geotechnical companies should still aim for 7% growth in 2008, although they may have to face some painful decisions to do so.
"With pressure on sales certain to come, some companies will need to cut costs in 2008," he said. "Sadly, for most, the term 'cost cutting' translates into job losses."
"Ernst & Young is already offering services to help firms implement cost-reduction programmes, and more of this will come as pressure increases. But don't be too hasty – 2007 was not a bad year overall, with margins averaging 6.7%. Indeed, for some exceptional companies, that percentage was in the mid-teens – in some cases for the second year in a row."
Pattison added that the next year could see a spate of takeovers in the geotechnical sector. "Those firms that find themselves in difficulty should not buy into the hype that they will be safe from takeover because potential bidders won't want to take risks against the background of a chaotic credit market.
"Arguably, there has never been a better time to go on the offensive, and companies with large cash surpluses will be able to make some dirt-cheap acquisitions in 2008 as others begin to fail. Once the early jitters of 2008 are over, buyers will circle and pounce."
He warns that some firms could go out of business. "Any company with escalating debts will certainly find it difficult to stay competitive, and even, in some cases, to survive," he said.