UK consulting market books slowest growth in 7 years

10 March 2020 6 min. read

A new study of the UK consulting market suggests Britain may be heading for economic trouble in the months ahead. In the year leading up to an economic collapse, revenue growth in the consulting sector tends to dip – something which seems to have happened in the UK, as the market endures its lowest growth in seven years.

Depending on how it is defined, the UK management consulting market boasts an annual revenue between £8-11 billion. The Management Consultancies Association (MCA), which uses the performance of its members to gauge the size of the market, states that Britain’s advisory sector saw its revenue surpass the £11 billion mark for the first time in 2019, thanks to accelerated growth of 8.3% over the previous year. While the industry’s representative body paints a very rosy picture of UK consulting’s present performance, however, its reckoning is not one which is universally agreed upon.

According to the latest release from Source Global Research, British consulting did indeed experience growth leading up to 2019, the sector’s performance was actually far more muted than the MCA asserts. According to the researchers, the market expanded from a revenue of £8.2 billion in 2018 to £8.6 billion in 2019, or an estimated growth rate of 4%. In stark contrast to the MCA’s figures, this would suggest that UK consulting is currently growing at its slowest rate since 2012-2013, when the market was still on the recovery path from a recession the year before.

Value of the UK management consulting industry

The gloomy figures should be taken with a pinch of salt, because Source historically has one of the most conservative estimates of the UK consulting sector’s size. Source generally uses a different set of parameters to assess the health of UK consulting, using what its analysts call the “big consulting” market, focusing on consulting work conducted by mid-to-large-sized consulting firms (those with more than 50 consultants), which typically includes work carried out for mid-and-large-sized clients. As a result, there are a plethora of firms which may be thriving, but are only represented by the MCA’s data, instead of Source’s.

With that being said, Source has also been ahead of the curve when it comes to revealing a boom in consulting activity. Between 2014-15, for example, Source suggested the sector had grown by more than 8%, while the following year saw around 7%. The MCA meanwhile currently asserts that those years indicate 7% and 5% growth respectively, something which could suggest its current ‘boom’ data is a realignment to take stock of that earlier expansion.

If that interpretation is taken as accurate, however, it suggests something rather troubling for the consulting sector, and the broader UK economy. In the lead up to a time of economic difficulty, revenue growth peaks before several years of swift decline. The impact is not immediate, as in anticipation of a slump many businesses engage consultants to help them find efficiency savings – downsizing staff, improving productivity, selling off wings of a firm to consolidate –  before tightening their belts as shockwaves of a downturn begin to be felt.

As noted previously by the MCA, 2006 saw massive 16% growth for the body’s members. A year later, as the credit crunch began to hit home in 2007, growth fell to 10%, and halving by 2008 as the great recession hit – and by 2009, the consulting sector was enduring a retraction of 7% negative growth. While, as mentioned, the MCA and Source use different data for their assessments, this could well suggest that the UK’s economy is on the brink of major distress.

How large is UKs consulting market?

Source’s data shows that since 2016, revenue growth has halved in the consulting sector. It has been a steady drop-off, as over the last few years consultants have been regularly called upon by clients to help prepare for the impacts of Brexit. Consultants have helped large numbers of companies to prepare for stagnant growth, if not an outright recession being caused by the UK’s withdrawal from the EU, and its subsequent redrawing of trade relations with its biggest economic partner. Now, as the Brexit process nears its end and the global economy as a whole seems set for a major downturn, many clients are putting off new contracts.

This is also evident in the public sector. Deloitte earned £103 million from Central Government in 2018-19 – up from £59 million in 2017-18 – while rival PwC received £95 million, KPMG £90 million, and EY £81 million. Beyond the Big Four, however, Source found that the consulting sector’s top clients – public sector and financial services — both endured challenging years, with the latter’s growth of 7% in 2017 falling to 4.1% last year, as clients try to use internal resources to do the work.

Zoe Stumpf, Head of Market Trends at Source Global Research, said the findings may not all be doom and gloom, stating, “At face value, the UK consulting market looks set to bounce back from the paralysis that affected some parts of the market in 2019. Hoping that the country will now ‘Get Brexit Done’, there’s a willingness to invest… especially in areas where digital technology can transform productivity.”

However, Fergus Blair, Senior Analyst at Source, warned that clients in the UK and US are increasingly likely to “push back on fees they think are too high.” He added, “Clients are less willing these days to pay high rates for junior [consultants] – more are saying they don’t see the point in paying large amounts of money for access to people who don’t yet have deep sector or technical expertise.”