A couple of week ago, we took a look at Construction News’s Top 100 Contractors. This week, Building Magazine have published their annual league tables for the Top 150 Consultancies and we’ve noticed some interesting trends.
The Top 150 consultants looks at engineers, surveyors, architects and project managers and the report shows some positive growth for the market.
But what are the main headlines and how will they affect the market?
To summarise, here are some key facts and figures:
The Top 10*:
- Mott MacDonald Group
- Arup (up 3)
- Turner & Townsend (up 2)
- Jacobs (new entry)
- Arcadis (down 2)
- WSP (down 5)
- Gardiner & Theobald
* Please note Atkins SNC-Lavalin did not submit figures this year. The Building top 150 consultants list is pretty comprehensive but doesn’t include transport planning only consultancies or management consultancies who provide capital projects advisory.
Fees per head increase
If we compare the UK fees with UK staff numbers, we can see that the amount of fees produced per person has grown considerably amongst the top 10 consultancies, with an average growth of 5%. The top 51-150 reported a marginal increase, with an average rise per head of 2%.
This growth may largely be attributed to the adoption of digital tools and automation of services amongst the largest companies, and potentially offshoring.
Turner & Townsend and Arcadis have both established specific digital divisions over the last couple of years, which are focused on bringing in new skillsets and developing their core service capabilities through use of data and digital technologies. Arup are undergoing a company-wide digital transformation programme.
All of this digitisation means that consultancies are able to work more efficiently; less people can do more work.
This also explains why the 51-150 group are experiencing slower growth in fees per head, as they may not have invested in digital as heavily as the giants have just yet.
Of course, the efficiencies brought by advances in technology carry their own set of concerns; if smaller numbers of people are required to do the work that is not great for a business that still primarily charges on its people’s time.
Consultancies are trialling new models of charging clients such as outcome or value based fees (% of efficiencies for example), or embedding a process which they own the IP for to gain recurring revenues. However, proposals for IP or outcome based service offers are difficult for public sector clients to procure within existing governance structures, so this is not gaining much traction yet with major public clients.
Staff numbers in the UK have risen over the last year by 21% and globally by 12% which is exactly what we would expect to see based on our experience with the consultancy market over the last year.
There are numerous major infrastructure projects currently in the development phase, which is always good news for consultants.
While Brexit may have an impact on this, we would also expect next year to continue in this fashion, before we find out how many of these major projects proceed to the detailed design and delivery phase.
A trend that continues to increase amongst the larger consultancies is the use of offshoring to reduced costs.
Large consultants can manage projects in the UK, but the more commoditised volume design work will be undertaken abroad in India or other countries where well-qualified design engineers can be recruited at far cheaper costs.
This could be one of the contributing factors to the increase in fees per UK head.
Infrastructure vs Commercial Building
Building Magazine reported, that despite the positive figures, many firms were concerned about the prospects of the market, with 25% saying they felt pessimistic about the year ahead.
This is largely in part due to the commercial building sector where uncertainty around the economy and how Brexit is going is causing some private sector clients to put projects on hold and take “a wait and see” approach.
In contrast, we have definitely not found this to be the case for the infrastructure sector, where government backed projects are still spending. Lots of our contacts in this sector are fairly confident about the year to come, as infrastructure seems to be more buoyant than commercial building.
The consultancy market is evolving fast and we have seen a significant increase in executive hiring by consultancies over the last year.
To discuss any executive recruitment needs, in the consultancy market or not, please do get in touch by replying to this email or calling on 0203 026 3871.