UK environmental consulting market still solid in spite of Brexit

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1 PRESS RELEASE 18 January 2018 UK environmental consulting market still solid in spite of Brexit UK EC sector reaches record value of 1.65bn in 2016 following growth of 6.3% Growth has been fuelled by strong demand across the major client sectors, but from infrastructure & development and the regulated industries in particular Significant M&A activity is reshaping the list of top-ranked service providers with the Top 5 notably consolidating their position (RPS Group, WSP, AECOM, Arcadis & Jacobs) Brexit poses significant risks which are factored into a less optimistic CAGR forecast for the next five years (at 2.5%) but will also offer significant opportunities for many environmental consultancies The latest report from business intelligence and market research firm Environment Analyst finds that the UK environmental consultancy (EC) market grew by 6.3% in 2016 to reach 1.65bn, outstripping the nation s economic growth of 1.8% by a significant margin. This is the sixth consecutive year of growth following a painfully slow post-recession recovery period, buoyed by strong demand associated with infrastructure & development activities - across the housing, transport, energy and flood defence sectors in particular - and a sustained recovery in public sector consulting work following several years of decline associated with government department austerity budgeting. Market growth in 2017 is expected to come in at a slightly more modest but still healthy rate of 4.5%, constrained by Brexit and the uncertainties impacting client investment decisions. The fully updated report provides a comprehensive picture of the current state of the EC sector and competitive landscape through detailed company profiles and statistics from leading firms operating in the environmental space - either exclusively or as part of multidisciplinary enquiries@environment-analyst.com tel +44(0) fax +44(0) Environment Analyst Limited, Talbot House, Market Street Shrewsbury SY1 1LG, United Kingdom

2 consulting operations - with the Top 30 [see rankings list overleaf] accounting for 71.6% of total gross market revenues (before any adjustment for sub-contracting through revenues). The research analysis suggests that the current market dynamics favour the larger operators, with the growing importance of major infrastructure projects requiring long-term multidisciplinary input for identifying, managing and monitoring environmental impacts. Collectively, the Top 30 firms achieved an aggregate increase in UK EC revenues of 6.7% in 2016 (weighted for their turnover). The increasing dominance of the larger players over the longer term - boosted by their involvement in several of the global engineering and support service industry s recent megamergers - is more spectacularly evident amongst the top flight, with the five UK EC market leaders accounting for a combined of approximately 29% of the total market, up from just below 18% in These five firms (ranked according to their gross revenue) are: RPS Group, WSP, AECOM, Arcadis and Jacobs. It is notable that each of these firms has been highly acquisitive over the last five years with AECOM, Arcadis, WSP and Jacobs each having merged with at least one other of the Top 30 at some point in this time-frame; while RPS has kept up a constant stream of smaller scale acquisitions both in the UK and overseas. Jacobs most recent acquisition of another Top 30 player CH2M (presently ranked 16th) - which is also the number two EC provider globally - at the end of last year should ensure it an improved position in the next annual market assessment, while three more of the Top 30 players were also acquired outright last year: Atkins by Canadian engineering and construction service group SNC-Lavalin, Amec Foster Wheeler E&I by energy services bedfellow Wood, and Waterman by the Japanese-based CTI Engineering. Other new names in this year s analysis include Anthesis Group and Peter Brett Associates (PBA), with the former s acquisition of energy efficiency specialist Sustain and PBA s alignment to the buoyant property and development sectors helping them to surpass the milestone of 10m UK EC revenues (which is required in order to enter EA s Top 30 peer group). The Top 30 practices - who together employ in excess of 11,600 FTE environmental consulting staff - saw their average contract value increase 5.5% year-on-year to 29.4k in The total volume of contracts they serviced rose by 1.1% to c40,400. However, the small firms (those with UK EC revenues of < 10m) surveyed reported an average contract value of 7.3k. Meanwhile, the international environmental consultancy businesses of the Top 30 including all overseas offices and acquisitions saw a 6.5% increase in 2016 to 9.7bn, with UK operations

3 representing just over 12% of the total. A similar proportion of their combined UK EC teams work (at 10.9%) is sourced from non-domestic projects. Based on the service area breakdown of the UK Top 30's aggregated UK EC revenues, Environment Analyst finds that four core EC disciplines continue to make up over half of the UK sector: environmental impact assessment (EIA) & sustainable development (17.9%); contaminated land/remediation (14.0%); and ecological/landscape services (13.0%) and water quality & resource management (13.0%). Linking into the strength of infrastructure & development related demand, the EIA work area proved to be the engine of growth for the sector last year as it has been for most of the postrecession period, adding in excess of 40m to the market total in 2016 alone and growing by 16.7% year-on-year. Water resources management was another strong discipline for environmental consultants with growth at 10.3%, with ecology/landscape services also maintaining its impressive track record of growth with an 8.3% increase. In terms of client sectors, revenues from government/public sector sources increased for the second year after being squeezed through austerity budgets, rising 4.4% to reach 319m (equivalent to 19% of the total market) - although there is still a long way still to go to surpass its segmental peak value in 2009 of 427m. Meanwhile, private sector sources accounted for remaining 81% of the UK EC sector, growing by 6.7% in 2016 largely thanks to strong demand from infrastructure & development and the regulated industries. The smaller financial and professional services sub-sector also experienced a notable increase in demand, translating to year-on-year EC revenue growth in excess of 13%. According to the study, the UK EC sector is forecast to grow by an average of 2.5% per annum between now and 2021 to reach 1.87bn, meaning that additional market space to a value in excess of 215m will be created over the next five years. However, the forecast is slightly less optimistic than in the previous edition of the report a year ago - which projected a compound annual growth rate of 3.7% - based on uncertainties associated with Brexit. These chiefly relate to the UK economic growth trajectory before and after Brexit takes place in 2019, as well as the country s ability to continue to attract inward investment to maintain ambitious national infrastructure programmes and whether UK consulting firms will find it increasingly difficult to compete for key contracts on the continent. Yet at the same time, there will be significant opportunities for environmental consultants to help the UK government reform laws relating to land management, farming and fisheries, waste management, ecological protection and more (with Defra already needing to recruit large numbers of specialists to help with the additional burden of Brexit), in addition to keeping their other clients informed as changes are made."

4 Contact for further information: Liz Trew, Editorial Director Tel: +44 (0) liz@environment analyst.com FURTHER INFORMATION 1. The 2016 Market Assessment of the UK Environmental Consulting Sector includes analytical commentary and over 140 tables and charts looking in detail at the UK environmental consultancy sector, the service areas and client sectors within it, and the performance of the Top 30 operators. The 94-page report is available to subscribers of Environment Analyst s Market Intelligence Service. 2. For further details (including a full list of contents and figures) see: mis 3. Our market analysis is based on core figures supplied by almost 75 companies (representing over half the sector in terms of UK environmental consulting revenues), a detailed analysis of the Top 30 consultancies, as well as market trends information collated from 250 environmental business managers via our Market Trends survey conducted during March to July in Environment Analyst Ltd ( analyst.com) is a publishing and market research organisation focusing on the environmental consulting and support services sector we collect and analyse information from the industry for the benefit of the industry. Environment Analyst also offers a Development & Infrastructure Service providing industry-leading news on brownfield, ecology, EIA & planning, flooding and sustainable building markets as well as running a range of industry conferences each year and an industry awards dinner. 5. Environment Analyst s market research has identified more than 675 firms active in the UK environmental consulting sector, of which c165 achieve annual sales in excess of 1 million 6. The UK environmental consultancy sector remains highly fragmented, with the Top 30 accounting for 71.6% of the total market when combined (before any adjustments for sub-contracted revenue). Together these practices handled over 40,363 environmental consultancy projects, employing some 11,652 UK-based environmental consultancy staff in The charts below are provided for publication:

5 Fig 1 UK environmental consulting market revenues and annual growth, e 2,000 30% 1,800 1,600 20% Revenue ( million) 1,400 1,200 1, % 13.6% 6.6% 3.2% 5.6% 3.0% 1.6% 10.0% 6.3% 4.5%3.6% 0.8% 1.6% 2.0% 10% 0% Annual growth (%) % -6.6% -10% -20% SOURCE: ENVIRONMENT ANALYST ANALYSIS Fig 3 UK EC market : Top 5 vs Top 30 80% % Top 5 29% 60% UK EC 1.65bn 50% 40% Other market 71% 30% 2008 Top 5 17% 20% 10% 0% Top 5 Top Other market 83% UK EC 1.44bn

6 Fig 2 Top 30 UK EC ranking 2016 Rank RPS Group 1 WSP 2 AECOM 3 Arcadis 4 Jacobs 5 Environmental Resources Management (ERM) 6 Mott MacDonald 7 RSK Group 8 ATKINS (member of SNC-Lavalin Group) 9 Ramboll 10 Arup 11 Ricardo Energy & Environment 12 SLR Consulting 13 Wood, E&IS (formerly Amec Foster Wheeler E&I 14 WYG Environment 15 CH2M (UK) 16 Royal HaskoningDHV 17 Bureau Veritas 18 JBA Consulting 19 MWH (now part of Stantec) 20 Capita Property & Infrastructure 21 Wardell Armstrong 22 Golder Associates 23 PBA 24 Cefas 25 PwC 26 Waterman Infrastructure & Environment (CTI) 27 Black and Veatch 28 Anthesis Group (inc Sustain) 29 Temple Group and The Ecology Consultancy 30 Share change