EFCA Barometer: “60% of countries forecast increased turnover in the next six months”

From navigating shortages in skilled labour and persistent late payments to grappling with political uncertainty and barriers to finance, the industry faces an array of obstacles. Nevertheless, the barometer underscores a prevailing sense of optimism among European engineering consultancies, with a significant 95% of participating countries reporting stable or expanding markets—a notable improvement since Autumn 2023.

A sector on the rise

For more than a decade, EFCA has produced a biannual barometer through surveys conducted by its member associations across Europe, tracking the sector’s development. Previous editions have illustrated a sector surviving a rollercoaster of challenges and successes. The industry has endured COVID-19 lockdowns, experiencing significant growth despite that major threat. It supported the green transition, which contributed to an overall upward trend. However, geopolitical uncertainties, especially following the Russian invasion of Ukraine, caused a downward shift. Now, the latest EFCA Barometer reveals a remarkable turnaround for European Consulting Engineering companies.

Henrik Garver, CEO of the Danish Association of Consulting Engineers and Chair of EFCA’s Economic Environment Committee, provides a more optimistic outlook in the Spring 2024 EFCA Industry Barometer. “The new EFCA Barometer is a strong indicator of change in the European economy. We have seen two years of markets in slow decline, primarily due to the Russian invasion of Ukraine and the subsequent spike in energy prices and inflation. The new EFCA Barometer for Spring 2024 indicates that this trend is reversing. The consultancy and engineering industry is seeing stronger order books, increasing revenue, and growing profitability. This is good news for Europe.”

Insights from EFCA’s Spring 2024 Barometer

The EFCA Market Index, which tracks the development of European markets, shows a dramatic resurgence. After peaking in 2021 and then steadily declining, the market has now experienced a significant uptick since Autumn 2023, indicating a very positive outlook.

This optimistic trend is mirrored in the employment index. Last Autumn, projections for Spring 2024 were bleak, with 15% of ECA Member Associations expecting reduced staffing needs and 55% anticipating growth. However, recent data reveals a complete turnaround: 100% of participating countries now expect to maintain or increase staff numbers in the next six months. This surge in employment confidence underscores the sector’s recovery.

European consultancies are also maintaining a substantial order stock of 8.4 months. Although this is down from the peak of Spring 2022, it reflects the industry’s ability to adapt during a slower market in Autumn 2023 by increasing staff and reducing order backlogs. With positive momentum building, order stocks are expected to rise again soon. Against this backdrop, most countries (63%) predict no significant change in order stock, underscoring stability.

Turnover expectations add to the optimistic outlook, with nearly 60% of countries forecasting increased turnover in the next six months, and most others expecting stability. Since 2018, turnover has been stable or growing in 90-100% of countries, with only a brief dip during the 2020-21 pandemic. Profitability has slightly dipped from 5.7% in 2021 to 5.4% in 2022, below the average of 6.0% from 2013-2022. While 2023 profitability data is pending, most countries expect no major changes from 2022 levels. However, for 2024, 40% of countries are anticipating increased profitability, showcasing a positive financial outlook.

Despite this optimism, the industry continues to grapple with significant challenges. As well as those already mentioned, staff shortages and rising labour costs have been persistent issues since 2021. Although low fees are less of an issue than before, they continue to hamper for the industry.

Driving Europe’s green future

Overall, the Spring 2024 EFCA Barometer paints a picture of cautious optimism, with strong signs of recovery and growth. According to Garver, “The primary drivers for this development are investments in transport infrastructure, climate adaptation, energy infrastructure, building transformation and renovation, and the ‘build-up’ of more resilient manufacturing industries, including stronger local value chains across Europe. In a way, the EFCA Barometer illustrates that for Europe to be a green and sustainable superpower, it requires a strong and innovative consultancy and engineering industry.”

The industry’s resilience and adaptability in overcoming past challenges pave the way for a promising future for European consulting engineering companies. Bolstered by robust indicators, the sector is well-positioned for continued success in the months ahead. As Europe strives for leadership in sustainability, the consultancy and engineering industry will play a pivotal role in driving this transformative agenda.

To read the full EFCA Barometer Spring 2024 edition, please visit: https://www.efca.be/sites/default/files/2024-05/EFCA_Barometer_Spring_2024.pdf