Conditions in the consulting engineering industry were "challenging" in the first six months of 2009, according to the bi-annual Consulting Engineers South Africa (Cesa) Economic and Capacity Survey released on Monday.

"Most of the responding firms reported a decrease in fee earnings," Cesa said.

"Compared to a 15 percent increase in nominal fee earnings in the last six months of 2008, fee income fell by four percent during the first six months of 2009."

This, however, did not mean all the firms were experiencing a downturn.

"Some firms still managed to report solid growth in earnings," Cesa said, adding that most firms expected tighter conditions in 2009 and had projected a 13 percent drop in the December 2008 survey.

Looking towards the end of the year, firms expected earnings to fall further by between eight and ten percent during the last six months, "suggesting more difficult times ahead."

Cesa said order books fell 29 percent compared to the last six months of 2008.

In June and December 2008 the value of outstanding fee income was 66 percent and 40 percent higher respectively.

"The drop in the order book supports the decrease in confidence levels with regards to working conditions in the next 12 to 18 months," Cesa said.

It said fee earnings outstanding from local government had increased to 13.2 percent of total earnings, the highest level since the December 2004 survey when fees outstanding escalated to over 14 percent.

An improvement in payments received from state owned enterprises, provincial government and foreign clients, reduced the percentage outstanding from a revised 12 percent in the December 2008 survey to 9,5 percent in the June 2009 survey.

Cesa said that for the first time since 2002 there had been a real, notable shift in engineering confidence.

"Since 2005, confidence levels amongst consulting engineers have consistently remained above 98 percent showing exceptional levels of satisfaction with current working conditions."

Cesa said confidence levels for 2009/10 deteriorated from an index value of 99.8 in December 2008 to 96.2 in June 2009, 96.7 in December 2009 and 64.3 for the first six months in 2010.

"The outlook for next year is the most depressed since December 2003."

Cesa said tighter working conditions were expected for the first half of 2009, but actual conditions were not "as bad as expected."

"Firms are not overly pessimistic for the next six months, but there does seem to be a greater level of uncertainty.

"Confidence levels are still fairly optimistic for the next six months, yet fee earnings are expected to fall and order books are less promising," it said.