How are consulting engineering companies weathering the economic recession?
While it's a tentative recovery, we are probably over the worst days of the economic downturn. A De...
While it’s a tentative recovery, we are probably over the worst days of the economic downturn. A December 2009 report from RBC bank, for example, asserts “Economy skates out of recession,” based on the fact that Canada’s economy grew 0.4% in the third quarter, after three consecutive quarterly declines. There were 79,100 jobs created in November, compared to 43,200 lost in October, and the unemployment rate edged down slightly to 8.5%. In the U.S. the picture is brightening too, and its economy is forecast to grow 2.5% in 2010. Meanwhile, RBC sees a rosy picture worldwide, forecasting “more stable financial market conditions” and “upgrades for the world economic outlook.”
So how far did the effects of the economic turmoil of the past two years reach into consulting engineering companies? How well have they weathered the storm?
After asking consulting engineers from Canada’s four largest provinces for their impressions, it seems that the vast amounts that governments have poured into public infrastructure spending has cushioned consulting engineers from the worst impacts. Across Canada, spending on transportation, water and wastewater infrastructure has been keeping firms busy, while their order books in other sectors such as commercial and private buildings and land developments, mining and industries such as forestry and the oil sands, have been diminishing.
On the west coast in British Columbia, Chris Newcomb, P.Eng., former chair of ACEC and president of McElhanney Consulting, says that activity in the transportation sector — highways and P3 projects in particular — has been been “hot” and promises to keep up for the next few years as well. While some forecasters believe that government funding will be channeled more to the education and healthcare fields, Newcomb says, “the transportation projects that are under way are so large that we’ll be busy for the next couple of years at least.”
Indeed, As previously reported in CCE, the B.C. Ministry of Small Business, Technology and Economic Development, said in November that the province’s major construction projects had set a record for the 20th time in a row. The province has $189 billion worth of projects planned or underway. It seems that B.C. consulting engineers who work in infrastructure don’t need to worry.
In Alberta, despite the slow down in the oil sands developments, engineering firms “are happy and healthy” according to Wendy Cooper, chief executive officer of Consulting Engineers of Alberta. A possible sign of how well firms are doing is that CEA has a record number of projects entered in its Showcase Awards this year.
Cooper says that although “firms working as sub-consultants to the EPC firms who work in the oil sands aren’t as busy as they would like, I’m told that is picking up slowly.” Meanwhile, she says, “lots of infrastructure projects from all levels of governments are keeping the Alberta firms busy.”
In Quebec, too, firms are busy working on public infrastructure. Pierre Nadeau of the Association of Consulting Engineers of Quebec (AICQ) notes that “firms specialized in public infrastructure – namely health, transportation and education – have been benefiting from massive investments by the Government of Quebec. Some of those investments were planned before the crisis struck, which helped a lot in reducing the impact of the crisis. A total of $42 billion will be spent by the government on infrastructure renewal over the next five years.”
Again, its firms who specialize in buildings for private developers and those in the industrial sector who have most felt the effects of the recession, says Nadeau.
In Ontario it seems to be much the same scenario, with infrastructure booming, but other sectors like building engineering suffering some decline. At least one Toronto company that specializes in mechanical systems for buildings has closed a branch office as a proactive measure because they anticipated a decrease in revenues in the region it served.
But for those firms that specialize in infrastructure construction, workloads have been steady. David Amm, P.Eng., who is chair of the board for Consulting Engineers of Ontario, is also vice-president of Hatch Mott MacDonald. “My observation,” says Amm, “is that Canadian consultants specializing in infrastructure projects are generally doing very well.” He says that from the point of view of his company, which specializes in infrastructure, “we continue to have a solid workload and a robust backlog in our Canadian division.” Consultants who service industries such as mining and manufacturing, however, are “sharing the pain of the slowdown in these industries,” says Amm.
Generally Amm believes that the future looks positive: “It appears that infrastructure projects with committed funding will provide a sustained engineering workload over the next few years at least. Hopefully, the demand for engineering services in the other sectors will soon improve along with the overall economy.”