Environmental Professional Services Sector Still Struggling in the Upper Midwest

16% Closure Rate From 1997-1999

September 8, 1999 - For Immediate Release

Contact: Cary Perket Phone: 858/488-4760

Minneapolis, Minnesota - The EI Environmental Database and Directory has just completed its survey results from 1999. The survey found that 125 of the 796 environmental professional service firms ("sector") that participated in the 1997 survey had closed. The closure rate of 16% represents a continuation of the sector contraction that EI has documented back to 1993. The survey results suggested an increase in closures from the 1995-1997 survey period.

Previous surveys by the EI Environmental Database and Directory Services found average regional closure rates of 12% and 32% between the periods of 1997-1995 and 1995-1993, respectively. In surveys prior to 1993, closures among sector firms were not very common. The late 1980s and early 1990s were a period of rapid growth within the sector.

EI Senior Analyst Cary Perket says, "Basically, the sector is still struggling to balance the supply and demand of its services. The reality of the situation is that the sector has been driven by a series of regulatory mandated projects that are now diminishing in number, size, and market value."

In all three surveys, the closures were predominately small firms with less than 50 employees. "This data shows that the more financially stable firms were the largest ones who were better prepared to withstand stronger competitive pressures," Says EI’s Cary Perket. "I would be willing to speculate that the majority of survivors will be firms, regardless of size, that diversified into other non-environmental services."

The percent closure among the individual states:

State 1997-1999 1995-1997 1993-1995

Illinois 20% 10% 33%

Indiana 18% 17% 32%

Michigan 19% 11% 35%

Minnesota 16% 8% 36%

Ohio 16% 15% 29%

Wisconsin 14% 12% 27%

Note: The difference among the closures in the five surveyed states is considered to be significant, random fluctuations in the survey populations.

Based on the Midwest results, EI statistics point to an overall decrease of 50 to 60% in the number of independent environmental professional service firms since 1993. "This has important ramifications to organizations that provide support services to this sector," states EI’s Perket. "These significant decreases in the number of sector firms means there are far fewer customers to provide financial support. This translates into a need for the support services to seriously re-evaluate their own business model for the sector."

"One has to question what is going to happen when the economy weakens. These firm closures are happening in spite of very favorable economic conditions over this time period," says EI’s Perket. "Already weakened from price competition, a major economic downturn could have serious ramifications on even the large firms among which we have documented few closures to date."

"The keys to the future seem to be diversification and specialization into more sustainable markets," according to Perket. "The sector’s environmental services have become viewed as a commodity service. Diversification allows firms to move into markets that have more favorable conditions. Specialization allows them to differentiate themselves and command more favorable pricing. Most firms have the ability to internally diversify and specialize, however, larger firms have greater resources to embark into these areas."

The Midwest survey has been used to update the EI Environmental Database and Directory Services. The EI Environmental Services Database is a subscription-based research service available on Envirobiz (http://www.envirobiz.com). Both national and regional database services are available. In addition to covering environmental professional services (e.g. consultants, laboratories, spill response firms, etc.) the database also includes municipal solid waste facilities, hazardous waste facilities, transportation services, and other services which are not included in the above statistics.

Further information for these services is available on Envirobiz (http://envirobiz.com). Envirobiz is a leading environmental Internet site and web host for proprietary database, information, newsletter, and research services for environmental professional. Environmental Information Limited has provided proprietary subscription-based and custom research on the marketplace for environmental services and technology since 1983. For more information on Envirobiz or Environmental Information Research Services, call 612/831-2473, fax 612/831-6550, or e-mail ei@mr.net. Environmental Information is located at 7301 Ohms Lane, Suite 460, Edina, MN 55439

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