Consultancy and engineering sector buoyant, says ACE

London - UK consultancy and engineering firms are continuing to experience increasing workloads in a buoyant sector according to the 2007 ACE State of Business report on how the sector is performing today and expects to perform in the future

During 2007, 74% of firms taking part in the survey reported growth in workload, with UK workloads growing by more than 5% for over half of respondents in the first half of the year. Meanwhile, 82% of firms said they expect their workload to grow in 2007 compared with 63% expecting growth last year.

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.

ACE senior economist Paru Patel said: “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.

THE ACE findings 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 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, noted ACE. The results, it said, 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.

More than half of the work won by consultancy and engineering firms is repeat business.For the second year running,  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. The larger the firm, the more acute the concern about skills shortages. Compounding the problem, firms are currently working at an average utilisation rates of 81%, up 3% from last year.