In an increasingly competitive marketplace, amid tight constraints on the funding available for development, infrastructure and public sector activity, consultancies have had to work harder than ever to maintain income levels and market share over the past year.
The picture is mixed, but the results from this year's survey point to a slight further fall in fee income during 2010/11, continuing the pattern of the previous two years. Few firms see much prospect of fee rates rising, while the proportion reporting problems with late bill payments is now 63 per cent, two percentage points up on last year's rate.
Table: highest earning UK planning consultancies 2010/11 (PDF)
Table: highest earning UK planning consultancies by sector (PDF)
The total planning fee income for the 87 firms providing revenue figures for the survey was £371 million in the year ending 31 March. That is down by £40 million on the 2009/10 figure, although the number of firms providing an overall income fee also fell from 105. Of the top 20 earners (see table opposite), about half reported lower earnings on planning work this year.
Comparing like with like, the 43 firms that posted fee income figures in both the 2010 and 2011 surveys saw aggregate earnings drop from £354 million to £345 million. Figures for the ten highest earning firms fell from £249 million to £243 million.
Other signals are more encouraging. For the 30 firms declaring incomes in the key residential planning sector in both surveys, aggregate income of £32.5 million was £5.5 million up on 2009/10. Furthermore, based on answers from 71 firms, expectations are that total fee income will rise by an average of eight per cent in 2011/12. Last year's prediction for 2010/11 was four per cent.
Among the top 20 earners, only URS Scott Wilson and David Lock Associates expect their planning fee income to drop this year, whereas GL Hearn predicts a 30 per cent rise. Across the board, only eight consultancies foresee a drop in fee income in 2011/12 and 16 anticipate no change. On the plus side, 12 practices expect their fee income to rise by at least 20 per cent in 2011/12 and another dozen predict a rise of between ten and 20 per cent.
The three-year downturn is the main factor behind falling income levels, particularly where firms' focus has been on housing, commercial and town centre development - all sectors hit hard by the recession. "We've just gone through a 12-month period where clients have been extremely cautious on what they will commit to. We've had ongoing work but overall there has been less to do," says David Lock Associates managing director Lawrence Revill.
At Savills, the difficult market conditions of the past three years saw planning fee income decline until this year, when it started to level out. "Hopefully we've hit the bottom of the recessionary cycle and things will now start to recover," says Roger Hepher, its head of planning and regeneration. Terence O'Rourke Ltd managing director Tim Hancock says: "The market remains very challenging and the pricing of work is very competitive. While we are doing less work overall, we are seeing an increase in higher value projects, which is encouraging."
Drivers Jonas Deloitte partner John Adams, who is the head of the firm's London planning team, says: "Public sector expenditure cuts have definitely had an impact on local authority and government-sourced or funded work. But, overall, our planning fee income has been stable across the UK, with growth from our work in London, Manchester and Birmingham and the retail sector nationally."
Some consultancies have stemmed the tide through mergers and acquisitions. Savills' August acquisition of the London Planning Practice is one factor in its fee income recovery. Jones Lang LaSalle's merger with King Sturge in May is also credited with bumping up fee levels. Director Jeff Field says that King Sturge's regional offices, notably in Nottingham and the South West, will help expand prospects on the planning side.
Also this spring, multidisciplinary firm Peter Brett Associates linked up with Roger Tym & Partners and Bristol-based Baker Associates. Although the registered name of the new practice is Peter Brett Associates, it will retain all three brands as trading names in their respective markets. Speaking for Peter Brett Associates, partner John Parmiter says the deal has brought together groups of professionals with very compatible cultures. "It gives us a platform to grow," he adds.
With major changes in legislation and policy due next year under the government's planning reforms, some consultancies expect appeals work to grow. Alder King Planning Consultants partner Alan Pearce predicts that housebuilders will get more bullish about taking schemes to appeal - especially if the government sticks to its guns on the presumption in favour of sustainable development.
Roger Tym & Partners' expertise on the Community Infrastructure Levy (CIL) looks set to provide Peter Brett Associates with a new stream of work, says Parmiter. "There has been an enormous increase in work on CIL. We are advising the government's frontrunner councils and anticipate that there will be another two years of CIL work for us."
Some firms continue to focus on London and the South East, reporting that the London market in particular is picking up. Turley Associates chief executive Rob Lucas says there is a north-south divide. "We are busy in London and the south of England, with a full range of planning applications, development plan promotions and residential masterplanning," he says. "Elsewhere, activity is less strong, but given our long-established presence across the UK, we are maintaining a healthy workflow."
Revill says that there is no desire among David Lock Associates' clients to take the foot off the gas on bigger housing and mixed-use projects, because of the number of homes needed in the UK. "Big urban extensions are a major part of our workload and we expect that to increase," he says. "Although mortgage availability is still a big problem, housebuilders are actively buying land for development."
In the downturn, some firms have switched their focus away from housing and regeneration. Steve Fidgett, managing director at Alliance Environment & Planning, says: "We are fairly broadly based, so we've been able to switch between sectors as one peaks and dips. We've seen growth in renewable energy, waste, retail, hotels and leisure."
For Savills, advising on major sporting venues following its success with Arsenal's Emirates Stadium continues to be a growth area, alongside energy planning and strategic residential land advice. Hepher says that despite the recession, some housebuilders have still been active. "They are using up land, so are seeking to replenish their stocks, particularly in the south of England," he says.
WYG deputy managing director Tim Holden notes that the retail industry is still investing. "We see this sector remaining strong and envisage strengthening our retail teams over the next 12 months. We have also noted some signs of a slow and rather fragile recovery in the residential sector," he says.
Energy, the planning market expected to show the strongest growth in 2011/12, has become a mainstay for many consultancies. A rise in work on solar farm projects has given firms such as Scott Brownrigg a boost in the past year, although planning director Jeff Pyrah recognises that government-imposed cuts in the Feed-in Tariff subsidy regime mean the industry will not grow in the way expected.
SLR Consulting is seeing more waste, minerals and renewable energy work, according to technical director David Sandbrook. But it also remains busy masterplanning for housing and mixed-use schemes. Sandbrook's forecast is for more strategic planning on major residential projects but another slow year for actual construction.
While public sector building activity has tailed off because of spending cuts, some firms are maintaining their involvement in education and health projects and capitalising on the sale of public assets to fund future schemes. Alder King is working on North Somerset NHS Trust's revamp of Clevedon Hospital and has been asked to bid to work up plans for an old hospital site in Bristol, says Pearce.
Plan-making work for local authorities is also opening up new avenues. "With the need to speed up production of local development documents, councils are likely to require extra capacity," says Dave Jolley, planning director at Capita Symonds' Urban Vision joint venture. "Increasing numbers of local authorities are now looking to enter into partnerships with experienced providers of planning services in order to maintain and improve service quality while securing cost savings."
At WYG, Holden says the financial squeeze on the public sector has created opportunities, especially where specialist skills have been depleted or axed. "We have noticed an increase in enquiries from local planning authorities, both about carrying out their development management functions and providing more specialist, site-specific forward planning, masterplanning and expert witness work," he says.
Given increasingly intensive competition for contracts, few firms were willing to test the market last year by raising their daily charges. Only 20 firms report that they raised their rates in 2010/11, and only six of those did so by more than five per cent. Meanwhile, 14 more cut their charging schedules.
"If we don't accept some jobs at lower fee levels, we wouldn't have enough work, which is unsustainable," says Revill at David Lock Associates. "But with inflation going up, we've got to think about raising our headline rates, even if we are prepared to negotiate on individual projects." Savills may also raise fees slightly in the next year for clients looking for a high level of service, says Hepher.
Jones Lang LaSalle and Alder King say they intend to keep fees the same to remain competitive. But Scott Brownrigg recently raised its fees by ten per cent, after several years of stability. Pyrah says: "Clients are still quite cautious in this market, but we are starting to see things pick up. We can always offer discounts as necessary and appropriate."
Ultimately, for fee levels and fee rates to start rising again, consultants say the economy needs to see resilient growth that will generate more development. "Many development projects continue to be marginal in terms of commercial viability," says Hancock. "Until business confidence in the economy is restored, returns on investment in land and property rise and funding is available at a sensible level, many developers will remain cautious."