As Building’s Top 150 ranks the industry’s consultants once again, after a covid break last year, it’s clear the world in which they operate has changed for good. Dave Rogers reports

Top 150 2021 graphic

“We need a sustained period of boredom. Boris always seems to be fighting something.” Alinea Consulting founding partner Iain Parker is speaking days after dire warnings were made about a couple of fertiliser plants in Cheshire and Teesside shutting down because of soaring energy costs. Up to that point, most would have been forgiven for thinking: “So what?”

Well, it turns out that they produce rather a lot of carbon dioxide, a gas that provides the fizz in a can of pop or beer, sedates pigs before they’re slaughtered to become pork chops and bacon sandwiches, vacuum-packs foodstuffs like bread, meat and salads, refrigerates products and is even used by surgeons during operations. In other words, a shortage of the gas affects our day-to-day lives considerably.

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Alinea Consulting founding partner Iain Parker

Carbon dioxide is a by-product of the fertiliser industry, and we know this because there was suddenly a nationwide shortage of CO2 last month after CF Industries, a US chemicals firm, temporarily closed its two UK plants a few weeks ago because of the costs to keep them running.

The impact of escalating energy costs led to talk of 1970s-style three-day weeks, which was dismissed by the government, but nonetheless, the impact of high gas prices does not just mean fewer bubbles in our fizzy drinks.

Arcadis partner Simon Rawlinson admits: “I think that we should be concerned about the potential knock-on effect for materials prices – particularly for energy-intensive materials including bricks, cement and steel.”

The week-long CO2 scare was replaced in the last week of September by panic at the pumps, which for several days saw long queues form at forecourts and dozens of petrol stations run out of fuel.

“There’s always something,” says Douglas McCormick, executive director at Gleeds. “But it’s the job of people like me to manage the headwinds to the best of our ability.”

Chief among these headwinds have been Brexit and the impact of the covid-19 pandemic. So, as Building’s Top 150 consultants league table returns (Top 150 Consultants 2021), after a hiatus last year, the industry is emerging from the pandemic only to be confronted by fresh battles.

Optimism on the rise

First, the good news. Everybody seems to be in a better place than a year ago, and firms are planning ahead rather than simply progressing from week to week in the face of lockdowns and the wider impact on the nation’s morale of thousands of hospitalisations and the four-figure daily death tolls from covid that were being recorded in the teeth of the pandemic’s third wave earlier this year.

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But while covid has not gone away, the success of the vaccination programme has given many reason for optimism. “Obviously, there is a nervousness about what the winter will bring, but from an economic point of view we are in a much better place than a year ago,” says Parker.

On a personal level, he is grateful for the vaccination programme. He contracted covid in August but, double-jabbed, recovered at home. “A year ago, I might have had to go to hospital.”

The next year is going to be tougher because of the lack of new projects that have come through

Iain Parker, Alinea

But Parker is not getting carried away with how the industry is faring. “I still think clients are quite hesitant. It will be flat for another 12 months. Maybe after Q2 next year things will start to motor.”

McCormick says he is expecting a series of mini‑crises, of the sort seen last month, to pop up throughout the whole of next year. He is not expecting the current materials shortage to resolve itself any time soon. “I don’t think it will settle down until early 2023,” he says. “The buying power of the major economies like the US and China can tie up the whole of the shipping world and the haulage world. We [the UK] are small compared with those vast economies.”

The materials shortage, most agree, will calm down eventually, but the skills crisis – for so long talked about against a backdrop of a seemingly unlimited supply of cheap EU labour – has become consultants’ biggest concern. “Everyone you speak to is really worried about it,” says Parker. “It’s a ticking time bomb.”

Labour shortages hitting hard

A former colleague of Parker’s at Davis Langdon, the firm snapped up by Aecom more than a decade ago, agrees. Core Five partner James Clark says: “The industry is waking up a little bit to the real impact of leaving the EU. Not enough labour means costs go up.” And if they go up enough, developers will sit on jobs until prices come down: “They won’t develop to lose money.”

Dan Fryer, a partner at Exigere, another QS to emerge from the Davis Langdon takeover, says: “We’ve got quite a lot of work but it can feel a bit flaky. The worry is that inflation might make something unviable.”

McCormick says the government needs to rethink its list of who can come into the UK, adding: “[The UK] has hung out the ‘you’re not welcome’ sign to these people, and that’s not good. We will be standing in a longer queue for overseas workers.

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Source: Richard Golding

Douglas McCormick, executive director at Gleeds

“We do need to get over the reluctance to make foreign labour feel welcome. There needs to be some easing on the [shortage occupation] list of those who can come in.”

And he warns: “We could do with more people now. At some point, this will become a general economic issue itself. We want to grow UK plc and we need people to do that.”

According to the Office for National Statistics, employment in the construction sector fell from 2.3 million in 2017 to 2.1 million at the end of 2020, representing a 4% fall in UK-born workers and a 42% fall in EU workers. The latest ONS figures show that vacancies were at a 20-year high between May and July this year, with 38,000 jobs left unfilled.

Clark expects the government to eventually come to a rethink over who can come in to work from the EU, once it realises jobs will be late or not happen at all. “Construction has always been a significant driver of GDP. The government will keep an eye on it, and I wouldn’t be surprised if they step in. They might reassess their policy in respect of visas for unskilled labour.”

Five years ago this month, Mark Farmer’s industry-defining report on the skills shortage was published, called Modernise or Die. Farmer, the director of consultant Cast, now says not much has changed – except that the issue of access to labour is even more pressing. To see how bad things could get, have a look at the petrol forecourts, he says, with concerns about not enough HGV drivers to deliver petrol to the pumps leading to panic buying.

He adds: “[The labour shortage] just means new homes, schools and hospitals will insidiously take longer to build, cost more and potentially increasingly struggle to attain quality standards.

“If we were in a post-covid economic slump and construction workload had fallen away, then declining labour availability would not be showing itself and would in reality be forgotten about for another economic cycle.”

Aecom’s Europe chief executive, Colin Wood, admits: “The labour and skills shortages are pressing issues and there is a fear that they could have an impact on projects. The predicted pipeline of work will demand a massive workforce of skilled people to deliver them.”

New ways of working

Wood, a former RAF wing commander who took the top role after company veteran David Barwell left last summer, says covid has forced firms to think about the way they work. “There is much more acceptance of different ways of communicating,” he adds, “and this can only be a good thing. Our industry is becoming more flexible and that will be key to attracting new talent.”

Andy Reynolds, chief executive of Rider Levett Bucknall, says the new ways of working – with the nine-to-five in an office five days a week seeming consigned to history – will be key to making inroads into the skills shortage – both in the office and on site.

“We need to attract people with different skills from different industries,” he says, adding: “We will most definitely maintain the full hybrid [working] approach. There is now a level of trust about home-working, but coming back into the office means you celebrate with the community of people you work with.”

Reynolds says that what the pandemic has taught the industry is this: “It is the importance of giving people meaningful work and progressing to the next phase of their career. There is a meaning and purpose to the work we undertake. It does make a difference to society.”

There’s always something. But it’s the job of people like me to manage the headwinds to the best of our ability

Douglas McCormick, Gleeds

Core Five’s Clark says staff at the firm, based on London’s Blackfriars Road, are now back in the office full-time. “When everybody was at home, people were working harder and longer during lockdown,” he adds. “But they didn’t cover the same amount of ground [as they would in an office] and were 5% to 10% less productive.

“With Teams you aren’t able to collaborate as closely, being able to talk, exchange ideas. Youngsters need a guiding eye or hand to help them. You can get that more quickly in an office.”

For Gleeds’ McCormick, the return to the office, even if only for a couple of days a week, is long overdue and something to be celebrated. “There’s a level of joy about meeting people again,” he enthuses. “It adds energy and creativity.”

Fighting for orders

Still, the industry hasn’t got through unscathed. “I’d be amazed if the consultancy world wasn’t smaller because of redundancies,” says Alinea’s Parker. There are reports that companies, keen to fill order books after jobs were mothballed by jittery clients last year, are cutting their fees to the bone to replenish depleted workloads.

Parker adds: “Sometimes when we get feedback, we find that [other bids] are at less than half our number. It makes no sense. The less-educated clients are accepting it.”

Exigere’s Fryer mirrors Parker’s concerns and adds: “Consultants are trying to fill order books. There’s lots of work that can be stop-start. There’s plenty of jobs where you can say there’s a pipeline, but people want the schemes that are getting going.” Core Five’s Clark says: “There are one or two who are cutting fees to unsustainable levels. It’s not good for the industry and I don’t think it serves anyone’s purpose.”

For Parker, now is not the time for firms to let their guard slip, even though the day-to-day threat from the fallout of covid has faded. “Most got through last year reasonably well,” he says. “I think the next year is going to be tougher because of the lack of new projects that have come through. The markets need a sustained period of normality.” But he adds: “There’s always something to rock people.”         

More consolidation ahead?

At some point between now and the end of the year, CBRE will complete its 60% acquisition of Turner & Townsend for £960m.

The consensus, without exception, is what a great deal it is for T&T and the 100 or so partners who stand to pocket life-changing windfalls.

It is a deal that has fascinated many, for obvious reasons: an industry stalwart; a well-known and widely admired chief executive in Vince Clancy; and the sheer amount that the US firm has stumped up – nearly £1bn – for a controlling stake, not a complete  cquisition.

What happens next is up for debate but, once completed, most are expecting new firms to come out of the deal, just like several – Alinea, Core Five, Exigere – did when Aecom snapped up Davis Langdon a decade or so ago.

“The T&T deal will give rise to new, exciting businesses,” reckons Core Five partner James Clark. “When firms are bought, new start-ups spring up – which is healthy for the industry.”

Alinea partner Iain Parker thinks other deals are on the cards. “There’s likely to be more consolidations. People make approaches all the time. You only get to hear about the ones that happen.”

Another deal that took place at the same time as the T&T one, Tetra Tech buying up Hoare Lea, had been on the blocks since early 2019 – more than two years before it was completed.

Tetra Tech previously entered the UK market in the summer of 2019, when it made an approach for WYG. Douglas McCormick was in charge of the listed consultant when the Californian company came in for the struggling firm, having previously been in charge of another listed consultant, Cyril Sweett, which was bought by Dar-owned Currie & Brown in 2016.

Now Gleeds executive director McCormick says: “It’s an excellent deal but it’s more about the US market than the UK one, as far as I can tell.”

His chairman, Richard Steer, has queried whether T&T will remain independent as Clancy has insisted it will, saying: “Mergers are a little bit like a pregnancy. One is either pregnant or not. You are never a little bit pregnant.”

McCormick says those remaining independents, such as RLB, Gardiner & Theobald and Gleeds, now having a selling point to clients. “The ability to remain independent becomes even more important. They don’t have external influences or ownership.”