Mass consolidation in the waste sector will lead to a dramatic drop in the number of waste companies over the next few years, according to Grant Thornton.

In its Waste Sector M&A Analysis Report, the adviser predicted that 20 per cent of the estimated 1,000 waste firms located in the UK would either merge or fail within the next three years.

The report highlighted a comeback in both the volume and value of waste M&A deals in the first three months after a marked fall in the second half of 2007. It added that during that period M&A in the sector surpassed £1 billion, for only the second time ever in a three-month period.

Grant Thornton’s head of waste M&A, Ali Sharifi, said the sector was “highly fragmented and fiercely competitive, and also evolving rapidly due to technological and legislative change, which was spurring on the predicted consolidation.”

“The waste sector is already running counter to the current economic downturn in the UK with strong growth forecast for the short to medium term by a range of analysts. With the predicted effect of legislative targets, many waste firms are now attracting both trade buyers and private equity houses as they look to make safe acquisitions for their buy-and-build strategies,” Sharifi added.

The report revealed that the UK’s waste sector was more “liberal” that the rest of Europe, due to the role played by the private sector. It added that collectively the industry generated a turnover of some £7 billion in 2007, with year-on-year growth of approximately seven per cent. M&A activity has generated more than £5 billion over the past two years.