Weathering the storm - Investors should be wary of writing off consulting engineers, says the ACE's chief executive Nelson Ogunshakin
Record profits recently posted by companies like Scott Wilson, Hyder Consulting and Atkins show the continuing vitality of the professional consultancy and engineering sector despite the current credit crunch. It raises the question: why are consultancy firms continuing to prosper while parts of the contracting sector, particularly the house builders, are experiencing difficulties?
Professional consultancy and engineering firms, especially the Plcs, specialists and medium-sized companies, have recognised the need to respond to global markets and have diversified across sector and geographic boundaries.
This has given them a more robust portfolio of work and client base that is not totally reliant on the UK market. For a number of years now, professional consultancy firms have been moving into new and growth markets in North America, Europe as well as the growing and emerging markets of the Middle East, China and India. As a result they have a much stronger and stable business model than suggested by the credit crunch-inspired stock market.
That business model, boosted by high growth in booming emerging markets, means that many professional firms in the consultancy and engineering sector are seeing increasing demand.
The skills of UK firms remain highly prized and firms are complementing those resources by bringing in talent from Asia-Pacific, Europe, and Africa, cementing their reputation as truly global sustainable and dynamic businesses.
This successful experience is contrary to that of contracting, which in the main is UK-focused.
While infrastructure is still busy, the private property and building sector is likely to be turbulent for 12 to 18 months.
In a global business environment any company that can respond globally and quickly to the dynamic market place is better positioned to ride out current economic trends.
As the latest financial results show, professional consultancy and engineering firms are proving themselves ahead of the game, yet the stock market has been less than fair to them.
Rather than looking at those high-profile parts of the industry currently experiencing problems and then making a judgment on the whole sector, investors and analysts should look at the positive signs from the consultancy and engineering sector and to see this as a growth area that will provide excellent investment returns.
Successful companies like Atkins, Scott Wilson, Hyder Consulting and others continue to thrive and will be at the front end of the next wave of boom in construction.
Notwithstanding the challenges posed by the credit crunch, most consultants recognise the need to be dynamic and forward thinking in their corporate positioning strategy. This will ensure that their global competitive edge is maintained, that they deliver shareholder value and appropriate return on capital invested, and help make this an exciting sector to attract and retain the best talent for a sustainable future.
- Nelson Ogunshakin is chief executive of the Association for Consultancy & Engineering