UK consultancy and engineering firms continue to experience increasing workloads in a buoyant sector according to the results of a report to be launched by the Association for Consultancy and Engineering (ACE) this week.
During 2007, 74% of firms taking part in the survey reported growth in workload. UK workloads increased by more than 5% for over half of respondents in the first half of the year, an increase on the previous year. Expected change in workload for the whole of 2007 is outstripping the forecast workload changes for 2007 in last year's report. 82% of firms expect their workload to grow in 2007 compared with 63% expecting growth last year.
ACE chief executive Nelson Ogunshakin commented: "The ACE State of Business report contains a wealth of information and the overall results show that our industry and investors can continue to be encouraged in terms of future workload and return on investment. Once again, the predicted future growth can only be good news for UK business."
The key findings are:
Commenting on the report, Francesca Raleigh of stockbrokers Numis Securities said: "The last 12 months has been another period of share price out-performance for the quoted engineering consultants. This has reflected their delivery of well into double digit earnings growth, profit upgrades, improved cash generation and perceived strong prospects. We believe that the sector will continue to be attractive in 2008."
Key results outlined in the report show that the largest and most profitable sector of operation for consultancy and engineering firms continues to be private housing with 70% of firms working in this area, down slightly from last year's figure of 74%. This sector accounts for 19% of consultancy and engineering output. The second most profitable work sector is private offices with 69% of firms working in this area. This marks a shift from last year's survey which reported rail as the second most profitable sector.
The least profitable sectors are other power, telecoms and aviation.
The proportion of total industry turnover generated through work in international markets has increased dramatically in the past 12 months since the 2007 report, from 11.5% last year to 56% this year. Part of this increase may be due to more large firms taking part in the ACE survey this year, but the results also show how UK consultants and engineers are adopting a geographical diversification strategy through acquisition of consultancy firms overseas in order to insulate themselves against a downturn in any particular country or sector. The largest firms surveyed reported that international projects account for more than one third of their overall turnover.
Sectors of operation again vary considerably with the size of the firm. Firms with a turnover of over £10m operate consistently across the majority of sectors, while the smaller firms tend to be concentrated in private housing work and private office developments. Most work continues to be procured through the traditional route, although the use of design and build contracts has grown marginally since last year. More than half of the work won by consultancy and engineering firms is repeat business.
For the second year running, consultancy and engineering firms highlight skills shortages, delays in payments by private clients and low fee levels as their top three concerns. Three quarters of firms ranked skills shortages as their top issue. Compounding the problem, firms are currently working at an average utilisation rates of 81%, up 3% from last year.
Commenting on the report's findings, ACE senior economist Paru Patel said: "Overall, the ACE State of Business report shows that the construction sector continues to grow at a healthy pace, with even faster growth than was predicted in 2006. Only 3% of firms reported a decline in output compared with 8% the previous year. The trend for an increase in workloads is consistent across all sectors, with the strongest performers in 2008 predicted to be other power, nuclear and wind energy and the leisure/entertainment sectors, with the latter sector expecting even greater momentum in 2008 and 2009."
Posted to the site on 27th November 2007
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