The economic recovery and renewed construction activity will drive industry growth
Los Angeles, CA (PRWEB) April 28, 2013
After a period of subdued economic growth due to dwindling backlogs and declining demand, engineering companies are set to rebound; the economic recovery will boost demand for construction projects and improve profitability, particularly among large operators that provide high-margin services like construction management, and those firms using computer-aided design systems, which provide cost-effective project assessment. For this reason, industry research firm IBISWorld has updated its report on the Engineering Services industry.
If it works, thank an engineer; if it breaks, blame an engineer. Unfortunately, there is little any engineer could have done to stop the recent breakdown in demand for the Engineering Services industry. Industry revenue started to decline as downstream construction markets came to a halt during the recession. While long-term contracts allowed many engineering firms to maintain revenue growth as the recession began, many companies delayed projects, leading to a decline in engineering firms' backlogs. The shortage of liquidity in global financial markets also cut into demand for engineering services. “These declines have caused revenue to fall at an average annual rate of about 1.2% to total $188.1 billion during the five years to 2013. However, the construction market has begun to show signs of improvement; as a result, industry revenue is expected to increase 2.7% in 2013,” says IBISWorld industry analyst Austen Sherman.
The Engineering Services industry is fragmented, with a large number of small-scale operators, which often provide services to regional markets or specialized niches. About two-thirds of firms are nonemployers, which were hit particularly hard by the reduction in demand following the recession. As a result, many of these small firms were forced to leave the industry in 2009 and 2010. Firms have begun to reenter as business conditions have improved during the past two years, says Sherman. Consequently, the number of enterprises has increased slightly at an annualized rate of just 0.3% to 145,253 in the five years to 2013. Similarly, many firms with employees reduced wages, head counts and the number of branch offices in order to maintain profit margins, which shrank for many operators as a result of poor demand. The industry displays a low concentration of ownership, with the four largest companies being URS Corporation and Fluor Corporation.
In the five years to 2018, the industry is anticipated to grow as the economy recovers, the value of construction rises and demand from key downstream markets revives. Profitability is forecast to improve slightly, particularly among large operators that provide high-margin services like construction management. Industry profit margins should also benefit from the rising use of computer-aided design systems that provide cost-effective project assessment. This technology will increasingly be used at construction sites via tablet devices, improving communication and reducing costs associated on-site errors. For more information, visit IBISWorld’s Engineering Services in the US industry report page.
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IBISWorld industry Report Key Topics
Industry establishments apply the physical laws and principles of engineering in designing, developing and using machines, materials, instruments, structures, processes and systems. These services may involve providing advice, preparing feasibility studies, preparing plans and designs, providing technical services during the construction or installation phase, inspecting and evaluating engineering projects and providing other related services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.