UK consulting firms member of the MCA have last year seen their revenue grow by 8%, outpacing the average growth rate in the market, reveals new data from the industry association. With total revenues of £5.2 billion the 50+ members hold approximately 60% of the UK’s consulting market.
Every year the MCA (Management Consultancies Association), the representative body for management consultancy firms in the UK, conducts research among its members to gain insight in key financial developments. Its ‘UK Consulting Industry 2015’ report presents an overview of the financial performance of its 50+ members, and provides insight in the key developments across service areas and industries.
The study shows that 2014 was a good year for MCA members, which includes large global firms such as Accenture, EY and BDO, as well as UK-based advisories such as Berkeley Partnership, Boxwood, Moorhouse and PPL. The combined revenue of MCA-members grew by 8.4% to £5.2 billion – the largest growth rate achieved since 2007, when the market expanded by 10%. Throughout the crisis years growth has been either negative (2009) or sluggish (2010; 2011), with the industry picking up since. The improving performance in finances however does not come as a major surprise, a previous survey from the MCA conducted last year already showed that more than 90% of member firms had either met or exceeded their fee income expectations for the year.
With a total turnover of £5.2 billion, MCA members represent 60% of UK’s consultancy market, estimated by the MCA to be worth £8.6 billion*. Consulting numbers increased amongst MCA member firms by 12% in 2014 to around 38,000. “UK consulting continues its recovery at a rate faster than the wider economy, including most other professional services. Consultants are supporting businesses in getting ‘match fit for growth’ – either through developing existing capabilities or through launching new propositions. Consulting is growing by helping others grow”, comments Paul Connolly, Director of the MCA Think Tank and author of the report.
From a functional perspective strategy consulting and digital consulting were among the best performing areas. Strategy consulting grew by 44% in 2014 to £537 million and now accounts for a tenth of all consulting activity. Member firms relate the sharp increase to the increasing willingness of clients to distinguish the value of consulting which brings together a range of skills and expertise to address complex strategic problems, from what is on offer in the low-cost, low-quality contractor and interim markets. Digital consulting grew by 27% to £1.4 billion, making it the largest segment within the UK consulting industry. Activity covers advice on Big Data, Cloud, Social Media, Gamification, Mobile and even Artificial Intelligence.
Operations and Project Management are after Digital the largest service areas, accounting for 13% and 12% of the market respectively. Environmental advisory and consultancy in the sales & marketing domain are in the typology of the MCA the smallest segments, each with a market share of 1%.
Industry-wise financial services remains the largest private sector buyer of consulting services (30% of market) and grew slightly last year. Consultants note that while some of this activity still concerns getting the sector in order after the financial crisis, the sector is sounder than it was and many of the new projects are improving service to customers through Digital. Infrastructure – although one of the smallest industry areas – grew by an astonishing 43%, testimony of the major projects MCA members are involved with, such as the Thames Tideway and Crossrail. The segment is expected to remain buyout, with developments such as AMP6 in Water, the possible expansion of airport capacity and the creation of Highways England forecasted to drive future work.
The public sector, the second-largest industry in terms of aggregate fee income, returned to healthy growth last year, however spending is nowhere near the peak level at the start of the last Parliament, when it was around £1.8 billion. Executives of MCA members say the growing spending is of new “long-termism” on the part of officials, driven by the need to achieve more for less. Consultants also note that the character of public advice is changing, being less about rescuing failing services and more about transformational change.
Looking ahead the MCA believes the UK’s consulting industry will be able to accelerate its growth, reaching 9% growth by 2017. Yet the MCA signals that the landscape is changing, with a growing divide between high- and low-value service providers. “Demand is rising for consultants who can provide solutions to complex and novel problems”, states Alan Leaman, CEO of the MCA, in the report. Firms that are not able to create the multi-disciplinary and multi-expert teams that are now needed to achieve the complex and inspiring outcomes that clients seek risk losing out. “Classic consulting is returning”, he says, relating to the growing demand, “and being reinvented.”
* Analyst firm Source estimates the UK consulting industry to be worth £6 billion – the discrepancy arising from different definition of consulting services and scope attached to firm size.