UK environmental consulting market growth slowed by Brexit

26 January 2018 3 min. read
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Strong demand across multiple sectors has fuelled another year of solid expansion among UK’s environmental consulting market. However, beyond market leaders, there has been a severe slowdown in the growth of the sector, exacerbated by Brexit worries, according to a new study.

According to data from Environment Analyst, the top 30 consultancies account for a collective 72% share of the total UK market for environmental consulting industry. Based on gross revenues in 2016, before sub-contracted fees, seven of the top 30 achieved meteoric growth of more than 20% in their UK environmental consulting turnover during the last financial year – including both acquisition-related and organic growth – and a further five saw growth in the region of 10-20%. A minority of six such firms saw their consultancy revenues contract in the same term.

UK EC Market share 2008-2016

The top five environmental consulting firms; RPS, WSP, AECOM, Jacobs, and Arcadis – who were recently selected to lead a lucrative emission reduction scheme in Chile and Canada – presently lay claim to almost 30% of the market total. According to the researchers, this dominance will likely expand further when CH2M’s environmental consulting revenues in the UK are also factored into Jacobs’ figures following its recently completed "transformational" takeover of its US network member.

Merger & acquisition activity led by, and impacting, firms within the top 30 was integral in determining the latest rankings and market shares, with six of the firms being acquired outright in the last 24 months. Entrants from last year Halcrow and AEA both no longer exist, having been acquired by CH2M and government environment contract holder Ricardo, respectively. In 2016, RSK also bought ADAS, Stantec aquired MWH and WSP snapped up Mouchel, while year we saw the entry of three completely new names to the top 30 – namely Wood, SNC-Lavalin and the Japanese-based CTI Engineering – via their respective acquisitions of Amec Foster Wheeler, Atkins and Waterman.

Slowed growth

Meanwhile, the broader environmental consultingmarket continued its recent growth spurt, at a rate of 6.3%, to reach its highest-ever value of £1.65 billion in 2016. The segment is set for a further increase of 4.5%, according to the latest available figures. Strong growth in infrastructure and development support and a sustained recovery elsewhere have helped lift UK's consultancy market well above its previous pre-recession peak. The data also reveals how the recent wave of industry M&A is consolidating and shaking up the rankings of the leading service providers.

Size and growth of UK environmental consulting market

However, while this remains a stronger rate of growth than the wider UK economy, it marks a noticeable slowing in expansion since the Brexit referendum on Summer 2016. Growth in the environmental consulting market of the UK was 10% at that time, but amid continued confusion as to which environmental directives will remain intact, following Britain’s divorce from the EU, the enthusiasm for companies to employ consultants seems to have flagged, as compliance with European regulations is perceived as becoming potentially irrelevant post-2019.

Analysts anticipate that the year when Brexit is finalised will also be when demand for environmental consultancy reaches its lowest level of growth – at 0.8% – before it begins to accelerate again. In 2020 and 2021, as the dust settles post-Brexit, companies will be keen to comply with the more permanent environmental regulations, or to respond to their absence, with growth in the sector reaching 2% in three years’ time.