The industry debates future prospects in the new political climate and finds that although risks remain the outlook is positive. Key industry figures gathered at an Infrastructure Intelligence round table discussion in association with Deltek.
At the first Deltek/Infrastructure Intelligence round table discussion since the Conservative Party won the General Election, small and medium sized consulting firms were feeling confident about the future.
Chair: Antony Oliver, editor, Infrastructure Intelligence
Rod Burton, partner, Pick Everard
Steve Capel-Davies, former chairman, Peter Brett Associates LLP
David Dryden, managing partner, Cundall
Chris Duddridge, senior business director, Deltek
Claire Gordon, director, Copper Consultancy
Mark Ingram, managing director, GHA Livigunn
Paul Jackson, director, N G Bailey
Blair Pringle, new business director, Deltek
Adam Sewell, partner, Alan Baxter & Associates LLP
Neil Smith, senior partner, Max Fordham
Projects are moving ahead, clients are spending and opportunities are knocking they said.
“We are much more confident than we were 12 months ago,” said Paul Jackson, director at NG Bailey, explaining that the firm was forecasting turnover to grow 25 per cent over the next three years. “The investment community is more optimistic and in particular, in the rail sector, with Crossrail 2 starting in 2020 and HS2 commencing in 2017 through to 2033, we are able to forecast possible workloads significantly into the future.”
Political consistency bodes well for major projects said firms with participants expecting to see HS2 Northern Powerhouse investments and other schemes outlined in the National Infrastructure Plan move ahead, alongside spending from regulated industries. The long awaited Airport Commission review into airport capacity has finally made firm recommendations about a third runway at Heathrow giving more certainty to the aviation sector and firms also reported a return to the market by private developers.
Although firms expect some major projects will favour large consultants, participants said that this then opens up new opportunities elsewhere. “For me the Olympics was the start of the recovery for the UK, first in building the infrastructure and then the feel good factor from hosting the games” said Mark Ingram, managing director at GHA Livigunn. “In the same way as the Olympics did HS2 will pull in the big firms leaving other substantial work to be done by SMEs like us.”
Yet risks remain with Claire Gordon, director of stakeholder engagement firm Copper Consultancy warning that the government needed to engage more with the public. “Government has to wake up to the fact that people are interested in infrastructure. The NIP could be another Olympics but this has to be captured and the government is in a position to encourage our enthusiasm through improved communication and dialogue. The NIP presents a significant opportunity but a gung-ho and bombastic approach could backfire.”, she said.
Others were more concerned about European issues. “There is a confidence in the market but it could evaporate if the Conservative Party tear themselves apart over an EU referendum. For all of us BREXIT is bad news because with that will go inward investment and confidence in the UK,” said David Dryden, managing partner at Cundall.
“Government has to wake up to the fact that people are interested in infrastructure. The NIP could be another Olympics but this has to be captured. A gung-ho and bombastic approach could backfire.” Claire Gordon, Copper Consultancy
Looking to the future firms discussed working overseas with Cundall, which has 12 overseas offices, remarking that SME culture was a valuable export. However there was some wariness about the opportunities. Most firms said they preferred to work with existing clients in new markets.
“There are some amazing projects but the rewards have to be weighed against the risks,” said Neil Smith, senior partner at Max Fordham who said that working with a local partner was often a good way to engage in projects overseas. However some consultants that had done this referred to instances where local partners had failed to live up to expectations simply using the international reputation of UK firms to win work and then ignoring them.
Other issues included challenges of repatriating funds, exchange rate fluctuations, the cost of disputes and in some markets low hourly rates.
Back in home markets firms reported that rising demand meant that contracts have to be renegotiated to reflect current conditions which are vastly different from the post crisis years. “We live on existing clients but it is time to say ‘you need to pay us more’” said Smith. “We have got to have hard conversations with clients,” agreed Ingram.
This makes having good data about clients and projects more important than ever. “Firms often assume returning clients are beneficial but we work with clients who tell us that they may not have received the level of profitability that they expected to when they signed the contract. They want to know whether they should work with that client again,” said Chris Duddridge, senior business director, Deltek.
Managing client expectations is another challenge said firms pointing out that budgets are more constrained than ever and yet expectations remain high, even in some cases grandiose, leading to fears that whatever firms deliver, clients won’t be happy.
It also means being careful about which clients to target. “Knowing the clients that respond to the sort of work that we do is important,” said Adam Sewell, partner at Alan Baxter and Associates.
“You have to take the cost, quality, programme triangle. Some clients are driven by quality, others by cost or programme. We have to be focussed in targeting clients that respond to the high quality work we produce. There is little point in us competing for projects where this is not part of what the client is looking for.”
"We started winning work in a lot of areas which allowed us to look at ourselves more as a national business and led to us opening new offices," Rod Burton Pick Everard
At the same time firms are also feeling the pressure to grow so that they can offer new and exciting work to their staff. For most that means organic growth and selecting the right opportunities, for others it means diversification. “We are about a 120 strong structural engineer and we feel this is the right size for us and we are not looking to expand in size but we are looking to expand the fields that we are involved in and the contribution that we can make to the built environment,” said Sewell.
Rod Burton of Pick Everard explained that securing a position on the government procurement service (GPS) framework had enabled major growth at the company and prompted the establishment of a bid hub to track and monitor opportunities.
“Getting on to the GPS framework alongside major firms gave us access to markets that we hadn’t been able to access work with before. We started winning work in a lot of areas which allowed us to look at ourselves more as a national business and led to us opening new offices in Manchester and Cardiff so frameworks are very important to us.”
But alongside growth comes the ever present spectre of resourcing. “The skills shortage is the biggest fear that we hear about,” said Blair Pringle, business development director at Deltek, which too is under pressure to serve the increasingly busy market.
“We’re a supplier to the engineering and architecture industry amongst the PS business and we are winning clients that we have been wanting to work with from 2008. This is putting the same pressure on us to secure the best talent to support our customers,” said Duddridge
For firms the pressure to grow is a welcome challenge that can be met through investment in the right people, technology that supports profitable growth and strong client relationships. Against a backdrop of political stability and economic growth, UK firms are well positioned to achieve their targets both at home and overseas.