UK consulting market to flatline as clients cut spending, study finds

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The UK consulting market will fail to grow this year for the first time since 2020 as fears over the resilience of the economy, an upcoming election and geopolitical tensions prompt businesses to spend less on corporate advice.

The retail, telecoms and pharmaceutical and manufacturing sectors are all expected to cut spending on consultancies, putting pressure on an almost £16bn market that boomed in the two years after the pandemic as management teams turned to external advisers to navigate the crisis.

The forecast is from an annual report on the consulting market by Source Global Research, which includes input from the Big Four of Deloitte, EY, KPMG and PwC and is considered a benchmark for the industry.

A combination of higher inflation and geopolitical uncertainty had already hit the market last year, with its topline growth slowing to 4.7 per cent from 15.6 per cent in 2022, according to the report. Businesses, it said, faced a “polycrisis” last year.

“This created huge levels of trepidation for clients, resulting in hesitancy when looking to put new consulting contracts out to tender,” the report found.

While UK inflation was 4 per cent in January, well below the more than four-decade high of 11.1 per cent hit in October 2022, it will not be enough to encourage companies to write bigger cheques for strategic advice, Source Global predicts.

“With clients continuing to adopt a wait-and-see approach to understand where to act if the economy begins to recover, we expect similar levels of hesitancy in 2024, particularly with the upcoming general election complicating public sector spending,” the report states.

The downbeat forecast underscores the challenges facing the Big Four firms that dominate the market. They have in recent months cut hundreds of jobs and, in some cases, frozen pay.

With the exception of 2020 when the consulting market shrank as the economy was hit by repeated lockdowns, Source Global expects this year to be its worst since it started tracking the market in 2014.

“We anticipate growth to slow across all sectors this year — and in some cases, dramatically so,” said James Beeby, research lead at Source Global.

“The market is therefore set to become both tighter and more competitive, and this will make it even more important that consulting firms demonstrate where value is being added.”

Consultancies advise businesses across a range of issues, acquisitions, technology and ESG. Below the Big Four, there are a group of mid-sized firms that include Grant Thornton and Oliver Wyman.

Last year the financial services industry accounted for £5.86bn of the market, the report found. Cyber security work, meanwhile, was the fastest-growing business line, up more than 17 per cent from 2022 to £1.7bn. A string of high-profile cyber attacks prompted more companies to boost spending on areas such as incident response advisory.

Contracts in the public sector made up £1.89bn of the market in 2023, up 14 per cent from the previous year, the report stated, but cautioned that uncertainty over the election would probably slow growth.

Prime Minister Rishi Sunak last week ruled out going to the polls in May and has previously said that his working assumption was that he would hold an election in the second half of the year.

A separate survey of consultants published by the Management Consultancies Association in January estimated that activity in the UK market would increase by 9 per cent this year, down from 11 per cent in 2023.


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