I'm cheating slightly here with my first ZESCO blog, however this artcile on 'Environment Analyst' summs up the market mood for the start of 2014. I cant share it on linkedin, so its worth mentioning here. Also nice to hear from Douglas Lamont, who was a memorable character when I worked at RPS over 10 years ago.
2014 - a good year for consultants?
Rob Bell reports on the year ahead and key growth areas identified by consultancy business managers (including from RPS, SLR, Environ)
For UK environmental consultancies that spent last year focused strongly on climbing out of recession just behind their clients, there is certainly a feeling they’re back in the sunlight and the path has flattened out to gentle, manageable slope rather than a near vertical clamber.
And with its actions – streamlined guidance, tax incentives, vocal public support and more – aimed at kickstarting the nascent hydraulic fracturing industry, the government has provided an almighty push towards rude health.
While other actions are not so welcome – wavering on support for renewables for example and talk of “scrapping” regulation (Environment Analyst 13-Jan-14 (http://environment-analyst.com/6367/pm-plan-for-culling-green-regulation) ) – consultancies are confident 2014 will prove productive and profitable anyway, with the big issues of energy and housing provision leading the pack in terms of demand for their services.
Recovery spreading to commercial development
RPS Group business information manager Douglas Lamont says: “The improving economic outlook in the UK, Ireland and the Netherlands is encouraging many of our larger clients in these countries to increase their spending on new and existing projects, so recovery is slowly but surely spreading from the residential and infrastructure sectors to the commercial and industrial sectors where many projects were previously stalled.”
Environ senior consultant Andy McVey has similar expectations for a 2014 that is “going to be a good year”, telling Environment Analyst: “We are seeing an increase in commercial activity generally, including property and corporate transactions and development. We are also witnessing greater scrutiny of the environmental risks associated with these transactions from lenders and financial institutions. This has been increasing over 2013 and we expect it to continue.
“Both the property and mergers and acquisitions sectors have seen an increase in demand; and development work is increasing, so there is planning, environmental and sustainability work around this. And, for example, we expect continued growth in environmental impact assessment work and managing environmental risks around developments.”
The energy agenda
Energy is the other biggie – the inescapable fracking of course, but also nuclear decommissioning, biomass and other renewables. One senior consultancy sector figure who preferred to remain nameless said: “Power generally – in all its forms – is going to be high up people’s agenda.
“There were some nasty shocks in 2013 around some renewables projects – in particular onshore wind – when the government started playing around with incentives and the big energy companies lost their nerve and stopped progressing projects. But the energy gap in the UK is not going away and nuclear decommissioning will go ahead so new power projects have to come on stream.
“New generation may be wind – probably more offshore than on – and new or replanted gas turbines, or other technologies such as biomass and solar. Either way, with nuclear plants closing, they will have to start coming through this year, so consultancies will be staying close to the big energy companies and working out which projects are going ahead and which are still stalled.”
And alongside new power plants, the legacy of previous decades’ generation offer opportunities. He says: “And for those consultancies that understand the sector and have a track record, nuclear decommissioning is going to throw up plenty of projects for environmental consultancies.”
Consultants eye up fracking
Lamont is confident RPS stands to carve itself a significant slice of the fracking pie as exploration begins to get underway and demand for a wide range of environmental consultancy services begins to build as environmental statements, EIAs, planning applications, community engagement and so on become a must-have for unconventional oil and gas firms (Environment Analyst 23-Jan-14 (http://environment-analyst.com/6348/market-insight-all-go-for-uk-shale-gas-part-ii) ).
He says: “Our position as one of the world’s largest multidisciplinary energy consultancies continues to distinguish us from other global players with little or no track record in resource exploration activity in deep subsurface environments.
“Our in-depth experience of shale gas development in the US and Australia stands us in good stead to contribute to projects in the sector here, where shale gas might yet serve to address some the UK’s energy security questions and support the transition to longer-term sustainable economic growth for a generation.
“And our extensive involvement in every type of renewable energy development is also a source of strength moving forward.
SLR Consulting operations director Alan Edwards also highlights the need to maintain broad horizons, saying: “We’re seeing far more interest in unconventional oil and gas – particularly shale gas.”
SLR carried out due diligence and evaluation of target sites for French energy multinational GDF Suez prior to its first move into fracking in the UK by investing in exploration licences held by Dart Energy. Edwards says: “The work is making good connections for us and creating good opportunities. So while I don’t anticipate too many opportunities in the short term, in the medium to long term we’re in an excellent position.”
SLR is also looking at possible clients outside shale gas developers themselves. “We’ve a number of irons in the fire when it comes to fracking” he says. “We believe we are well placed to support gas companies and operating companies – particularly in securing permissions and the equally important social license to operate.
"Furthermore, there is the opportunity to assist both new and existing clients with large land holdings, such as minerals and mining companies, in potentially adapting their existing infrastructure into ‘gas hubs’ to support the fracking process.”
No magic bullet
Not all in the field are so enamoured of fracking however. One anonymous consultant tells Environment Analyst: “[Prime Minister] David Cameron seems to think fracking is going to be his golden key to lower energy prices. I wait to be convinced.
“And in my view, at this stage the main consideration is going to be finance and basic assessments of available reserves. Most of the players in the fracking space seem to be relatively small concerns and they won’t be self funding projects the way the big energy companies do, so they’ll need to get a bank on board before anything starts to move.
“Early in the chain the work will be there for the due diligence/bank finance guys (including some environmental due diligence) and those geological engineers who understand modelling of gas reserves. I would have thought the big environmental approvals and planning of projects won’t come until the banks are convinced reserves are available and accessible.”
Other growth tips
In terms of other consultancy work areas tipped for growth in 2014, Lamont says that for RPS “our occupational health and human health risk assessment business streams have proved particularly buoyant in 2013 and we believe there’s a growth trend there”.
Meanwhile, Edwards says waste remains very important to SLR, although client needs have changed considerably in recent years. He says: "There are still opportunities for growth in providing specialist services, for example around areas such as the changeover to energy recovery from biomass."
And another senior consultant says: “Another big sector is going to continue to be transport infrastructure, in particular rail. Besides plans for High Speed 2, there are lots of electrification, line and station upgrade projects in the pipeline, so again if an consultancy has a track record in the sector there should be plenty of work.
“And my final tip would be industrial and building energy efficiency, which seems to be a buoyant market with companies seeing there are real savings to be made from projects.
“It is an area that has become less about CO2/corporate sustainability than it was a few years ago and is now all about the opportunity to save money.”
Inward investment drives demand
The trend towards inward investment and recovery in corporate transactions are also positive drivers for environmental due diligence and related services.
McVey says: “We’re expecting an increase in mergers and acquisitions and private equity activity. PE houses have funds available and are looking for key opportunities. This will have an impact on consultancies and the type of work they offer.
“Throughout 2013 there was increased inward investment into the UK from sources such as the Far East, sovereign wealth funds and high net worth individuals from Russia and the Arab states, and we see this as set to continue. There is also investment coming from non-traditional sources, such as China.”
McVey concludes: “There’s still a degree of caution – everyone feels it – but there are increasing opportunities for growth. There is definitely the feeling that 2014 is going to be a good year.”