Environmental consultancies are facing up to the impact of recession, with many undertaking cost-cutting, redundancy programmes and reorganisations, as the downturn intensifies.
In a report issued in January, analysts Plimsoll said 100 out of 665 UK environmental consultancies it looked at were in financial danger. Of these 100, 32 increased their debts in 2008 and 71 were losing money. And, with the sector suffering from over capacity, some are not expected to survive while others will be taken over.
David Pattison, senior analyst at Plimsoll and author of the report said of the 100: "They have all got to do something, or they will go under".
Redundancies are becoming widespread. WSP is shedding 500 posts across the group globally, including 20 in its UK energy and environment division. The cuts amount to 4% of the division’s workforce, while other staff have been redeployed. The group’s order book shrank by 5% in the second half of last year. In a recent trading statement, it said the downturn was impacting its activities in commercial, retail and residential development. It has acted accordingly, aligning costs with revenues, particularly in the UK.
Contaminated land accounts for a third of the energy and environment team’s sales. The sector has been particularly hard hit, with a number of redundancies resulting. Nevertheless, some areas remain growth sectors for WSP. The team handling Energy Performance Certificates has continued to grow, while secondments to international assignments have allowed the group to retain skilled staff.
The downturn is also likely to see Arup lose almost a tenth of its 4,200 UK workforce. Up to 400 redundancies are scheduled for the first quarter, though it is unclear how many of the group’s environmental staff will be affected. Contract staff will also be laid off, as work dries up.
Redundancies are also on the way at Environmental Resources Management (ERM). Keryn James, its newly appointed UK and Ireland managing director, told ENDS the cuts would be "fairly small scale" and focused on the advisory, mergers and acquisitions, and contaminated land sectors. ERM hopes to avoid further redundancies by moving staff from shrinking work areas and into growth sectors.
The property downturn has hit ERM particularly hard. "The property sector is dead for us at the moment," said Ms James. "We have historically done a lot of work in regeneration, contaminated land and property, but now it has just stopped."
Mergers and acquisitions (M&A) activity has diminished as the credit crunch continues. "Private equity work has pretty much dried up," said Ms James. She added that there was some continued activity in corporate M&A, particularly in oil and gas, but that this was markedly down on pre-September 2008 levels.
After several years of rapid growth, ERM is forecasting flat revenue for 2009. Nevertheless, it aims raise its market share this year; something the company has achieved in past recessions.
Downturns in some sectors will be offset by growth elsewhere. Work on carbon and climate change issues has seen the fastest growth in recent years, which is expected to continue. "The message we are getting from clients is that energy and climate change are still incredibly important," says Ms James. "Not only in terms of doing something about their own emissions, but also in wanting advice about what climate change is going to do to their operations."
Consultancy work on renewables is also tipped for growth. Development of offshore wind farms is of particular interest. Waste is another area set to buck the broader trend. Ms James said client demand remained strong and ERM’s waste planning team has been expanded. Further appointments are planned this year.
Elsewhere, the downturn has led White Young Green to make changes at board level. Chief executive Lawrie Haynes has left "by mutual agreement." He is replaced by Paul Hamer, the former chief operating officer, who has become group managing director. The role of chairman Peter Wood will also be enhanced.
"Over the last few months, White Young Green’s priorities have changed in response to the challenging economic environment," said Mr Wood. He added the company had made changes to position itself to exploit the eventual recovery.