In our latest consulting industry benchmarking report, we analyzed hundreds of firms and uncovered new insights about the engineering industry.

During the past year, engineering services firms across Australasia, North America, and the United Kingdom have been dealing with a complex and evolving landscape. Despite various regional challenges, several global themes have been prevalent. These include inflationary pressures, the growing importance of digital transformation and sustainability.

Today, we will share the trends that have significantly impacted the engineering environment, shaping the opportunities and challenges firms face.

Emerging Trends

This year, industry trends have been marked by both economic pressures and exciting technological advancements.

The following trends are significantly shaping companies' financial and operational strategies as we look ahead to 2025.

Market segmentation amid tough competition

Our analysis found that the average billable rate in the engineering sector is $104 per hour. However, this average conceals a wide range. High-value firms, which comprise 38.6% of the market, charge rates ranging from $201 to $250 per hour, demonstrating a clear market segmentation.

The data indicates that firms with advanced technical expertise or specialized services can demand premium prices, while others are limited to competitive pricing ranges of $50 to $150 per hour. According to Deloitte's 2024 engineering and construction industry outlook, the recent spike in competitive pricing occurred due to standardized service offerings or lack of market differentiation.

Economic challenges are leaving team members on the bench

Utilization rates by firms vary considerably. While most firms achieve company utilization rates between 71-80%, only 4.5% manage to exceed 90%. Comparing this to the global percentage of all consulting industries reaching the 90% mark, which sits at 16.8%, a considerable disparity exists between the engineering industry and the wider market.

This disparity could be attributed to a combination of internal challenges and broader market conditions.

Firms are internally struggling with resource allocation conflicts due to overlapping project needs and changing scopes. Meanwhile, external economic conditions like rising interest rates, inflation, and supply chain disruptions have worsened these challenges. These tightened financial conditions have slowed project timelines and reduced new work availability as clients face budget constraints and delayed decision-making.

Pressure on gross margins and lack of visibility

The financial pressure on firms is further evident in their gross margins. While 25% of firms report margins between 21-30%, many firms lack complete visibility into their profitability.

Many companies face challenges with inadequate financial oversight and management, making them vulnerable to unexpected market shifts and unplanned cost escalations.

However, we have seen increased concerns regarding low financial visibility, and more teams are seeking to implement software that gives them better financial control in these challenging economic conditions.

Market strengths

Despite economic and operational challenges, the engineering industry still demonstrates crucial strengths that position firms to adapt and thrive. The following are the strong signs of growth in the market heading into 2025.

Pricing adaptability and revenue generation

Engineering firms generate an impressive average annual revenue of $106,841 per full-time employee, underscoring their ability to monetize their people's expertise. So, despite lower utilization rates, firms are still making healthy revenues.

Additionally, engineering firms are increasingly offering bundled services and subscription models, which provide clients with more predictable costs. This approach has been helping firms stabilize their cash flow and enhance client relationships by integrating their services more deeply into their clients' operations.

Technological empowerment

The widespread adoption of artificial intelligence and PSA software is transforming engineering firms' operations. These technologies help firms enhance project accuracy, streamline complex workflows, and enable real-time data reporting and analysis.

Access to this advanced reporting has been driving better financial decision-making and improved operations. This tech-driven evolution is not only improving efficiency, it's reshaping how firms create value and compete.

Opportunities for growth

To strengthen their market position, engineering firms can leverage the following opportunities.

Time management and accountability

Late time entries are a persistent issue, with 21% of timesheets submitted days after the workweek ends, averaging delays of 4-5 days. This delay not only slows down billing cycles but also distorts project performance.

There is a significant opportunity for companies to implement automated time tracking. Simplifying timekeeping reduces the administrative burden associated with manual timesheet management and ensures that all billable hours are captured and billed to the client.

Learn more: On time every time, On time, every time: How to stop late timesheets with timesheet reminders.

Increased demand for sustainability projects

The surge in demand for sustainable engineering solutions, such as renewable energy and decarbonization projects, presents a clear growth path.

Firms that prioritize green technologies and sustainable design principles can meet client demands while positioning themselves as leaders in the industry's shift toward environmentally conscious solutions.

High growth sectors

The rapid expansion of sectors like electrification, renewable energy, and technology-integrated solutions offers substantial revenue potential. Engineering firms that invest in these areas can access new markets and differentiate themselves through innovative, tech-driven offerings, aligning with broader industry shifts and client expectations.

Engineering services in 2025

The engineering industry is at a crossroads, facing both challenges and opportunities moving into 2025. The research included in this article indicates that economic pressures, including inflation and labor shortages, have already caused firms to reconsider their strategies.

On top of this, leading firms are utilizing advanced tools such as AI and PSA software to transform their projects and enable them to get the most out of their client engagements.

Lastly, there's a growing demand for sustainable and tech-driven solutions, creating exciting pathways of growth for firms willing to rise to the challenge. Companies that focus on sustainable innovations and flexible service delivery offerings will likely be better placed not only to respond to emerging client needs but also to assume market-leading positions.

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