The UK economy was heavily impacted by the coronavirus (Covid-19) outbreak and the subsequent lockdown measures, with industry output falling by 13.6% in real terms last year. The construction sector has been deeply scarred by the strict lockdown measures and other restrictions imposed to contain the outbreak, despite an improvement in output in the last two quarters of last year.
Having suffered severe disruption last year amid the pandemic, the global construction industry is in a recovery phase in major markets around the world. This provides some hope for an improvement in the pipeline of work for design companies, primarily architects and engineering consultants.
GlobalData estimates that global construction output will grow by 5% this year, recovering from a decline of 2.5% last year. Although Covid-19 created major challenges for contractors in terms of site closures and extra costs involved in making sites ‘Covid secure’, architects and engineering consultants generally adapted quickly to the new operating environment, and this has accelerated the shift towards cloud-based technology and applications.
Despite this, the impact of Covid-19 on investment and the pipeline of opportunities meant that many leading design companies recorded a decline in revenue last year. US-based engineering firm AECOM, which currently tops GlobalData’s Global 500 Design Companies list, recorded a fall in group revenue of 3%, while revenues for WSP Global, Arcadis and Stantec fell by 1.3%, 3.2% and 0.7% respectively. However, American consultant Jacobs Engineering recorded a relatively positive performance, with its revenue up by 6.5%.
More than half of the Global 500 Design Companies are either headquartered in the US or the UK, and these companies collectively account for 53% of all live mega projects involving the companies on the global list. Canada and Australia follow, with 67 and 38 companies respectively on the global list. Although the companies’ headquarters are heavily clustered in these four markets, the leading design companies are typically well-diversified in terms of the geographic spread of the projects they work on. Based on the regional diversification index, AECOM and UK-based engineering consultant Mott MacDonald are among the most geographically diverse companies in the Global 500, closely followed by Arcadis, WSP and Jacobs. As the list comprises ultimate parent companies, the diversification score also reflects the spread of work via a company’s subsidiaries. For example, Canadian firm SNC-Lavalin’s projects include those of its UK subsidiary, Atkins.
The highest-ranked company not headquartered in either of these four markets is Dar Al-Handasah Consultants Shair and Partners Holdings Ltd (Dar Group), a Lebanon-based engineering consultant that is a parent of American architect Perkins and Will and American engineering consultant TY Lin International Group. Dar Group also owns a minority stake in Worleys, an Australian engineering consultant. Other firms in the top 10 that are headquartered outside the US, UK, Canada and Australia include Japan-based engineering consultant Nippon Koei and Dutch engineering consultant Arcadis.
Some of the largest Chinese contractors appear in rankings, reflecting their ownership of engineering consultants. For example, China Railway Construction Corporation Group ranking 30th reflects the activities of its subsidiary, China Railway Siyuan Survey and Design Group.
Many of the design companies in the list offer a range of services, but based on an assessment of their primary job roles on the projects tracked by GlobalData, the list features 331 architects and 174 engineering consultants or other consultants, including companies that also provide contracting services. Although the list comprises far more architects than consultants, there is more of a balance in terms of the share of work, with a 52:48 split between architects and consultants. The highest positions in the Global 500 list are dominated by consultants, but the leading architect, US-based M. Arthur Gensler Jr. & Associates Inc (Gensler), is ranked fourth, followed by Canadian firm IBI Group at 11th and US-based Skidmore, Owings & Merrill LLP at 19th.
The fallout from Covid-19 could bring about some major changes in the global design industry. It is unclear to what extent discussions formally took place on a possible merger of WSP Global and AECOM as talks reportedly broke off in April as the pandemic escalated, but given the dominant position these two firms hold in their own right, if such a merger were to take place, it would create an industry behemoth, with revenues of around $20bn.
In February, WSP Global acquired Earth Consulting Group, a US-based environmental and engineering consultant, having acquired American environmental consultant LT Environmental early last year. Other industry highlights of last year include Nippon Koei forming a partnership with Singapore-based consultant Surbana Jurong, under which the two companies would work on delivering “sustainable and resilient solutions” to development projects across the world. Alongside WSP Global’s recent acquisitions, this partnership is indicative of a greater focus on sustainability in architecture and engineering practices.