Environmental consulting sector growth slows ahead of Brexit

13 March 2019 Consultancy.uk 4 min. read
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The UK environmental consulting market is likely to shrug off Brexit anxieties to reach a size of £2 billion by 2022. A new study has found that while growth in the market has seen a notable slowdown since the 2016 referendum, global trends that have buoyed environmental consulting demand worldwide will continue to boost business in the UK, even after it withdraws from the EU.

The UK’s environmental consulting market has continued its recent growth spurt, at a rate of more than 5% to reach its highest ever value of £1.73 billion in 2017. The sector had already surpassed its pre-crisis level of business the year before, but growth had slowed significantly in the wake of 2016’s shock referendum result, which saw the UK commence proceedings to exit the European Union.

According to the latest available data from Environment Analyst, this slowdown has continued ever since, and is likely to have dropped to a growth rate of less than 3% at present. Despite this, the news and market intelligence company believes the outlook is bright for the sector, anticipating that the UK’s environment consulting market will enjoy revenues of more than £2 billion by 2022, for the first time.

In its annual report into the sector, researchers from Environment Analyst found that infrastructure opportunities, increased public sector spend and more effective management structures forged during the fires of the last recession had helped consultancies to achieve continued healthy organic growth. This, even in the face of Brexit anxieties which have contributed to a slow-down in the UK consulting market as a whole.UK environment consulting market annual revenuesThe report’s findings showed that a leading peer group of 28 environmental consultancies based in the UK account for a dominant 71% share of the market. According to the gross revenues reported by these firms in FY17, five companies recorded substantial growth of more than 20%, while a further three saw growth in the region of 10-20%. At the same time, just six firms saw revenue decline during the period, suggesting that the market as a whole seems to be performing at a healthy level.

Ross Griffiths, a co-author of the report, commented, "During this time of huge political and economic hiatus, the ability of the UK environmental consulting sector not only to show resilience, but to record organic growth and outperform the economy is extremely positive. Growth in 2017/18 exceeded our expectations as spending on transport and energy infrastructure schemes has kept environmental consulting practices busy. However, while these contracts provide a size and scale not matched anywhere else, it is worth noting that other sectors are showing signs of fragility in the current climate.”

Infrastructure dependence

The environmental consulting sector of the UK benefitted from a range of public sector infrastructure renewal programmes. It enjoyed particularly fruitful opportunities associated with the High Speed 2 rail line, Highways England’s first road investment strategy and the Government's enhanced commitment to house building. As long as such projects continue, the sector is likely to remain in rude health. The question is, if Brexit hits the economy hard, how strong will the Government’s commitment to infrastructure investment remain?

Conservative back-bencher Jacob Rees-Mogg recently urged the Government to scrap the controversial HS2 rail line before spending a further £98 billion on it, while late last year beleaguered Transport Secretary Chris Grayling admitted he was already considering ditching the Northern section of the line. As the economy continues to flatline before Brexit even takes effect, it could be a foreboding omen of things to come – something which should concern environmental consultants. If the additional revenue supplied from infrastructure and development clients was removed, the market’s growth would have been flat.

While the UK environmental consulting market might console itself with the assertion that slow growth is still growth, it may additionally trouble those in the sector to consider the state of the global market. Worldwide, the environmental consulting sector saw revenues leap by 6.2% in 2017, reaching a value of £25.3 billion. According to Environment Analyst, this constitutes almost double the growth seen in 2016, and is by far the best performance in all the years the group has tracked the global market.

Multiple signs point toward 2018 and 2019 seeing similar improvements. In this context, the British market’s declining levels of growth surely will give executives in the sector more pause for thought. The environmental sector of the UK seems poised for a period of uncertainty, looking ahead, as rosy as a £2 billion forecast by 2022 might be.