UK's £14.9 billion consulting industry sees revenues shrink

The UK consulting market saw revenues shrink for the first time since the lockdown era, according to a new study. Analysis by Source Global Research suggests that the industry will return to growth in 2025, however, to hit revenues of close to £16 billion.

The sustained slowdown in the consulting sector saw the UK industry’s collective revenue move into negative growth, according to Source. This is the first time since the pandemic that this has been the case – with consultants having enjoyed a brief glut in demand following the lockdown period of 2020.

In 2021 Britain’s consulting industry grew by 13%, and then by another 15% in 2022 as companies splashed out on help and advice to get them ready for post-Covid trading. But over the last year, Source estimates that consultants endured a 3.4% contraction – one which could not have come at a worse time for many large firms.

Amid the post-lockdown boom, the Big Four in particular committed to huge hiring campaigns, in anticipation of further growth in demand. But with that having not transpired, they have regularly made the headlines with layoff campaigns, in a bid to maintain the profits enjoyed by their partners.

At the same time, public sector contracts are undergoing a period of uncertainty. The second most prominent sector for consulting work, the change in government of 2024 brought with it an administration that pledged to scale back consulting spending in government by multiple billions over the coming five years. Whether or not that transpires in full, it has placed further pressure on firms following a challenging year.

Even so, Source anticipates that consulting in the UK will return to growth in 2025. According to the researchers, revenues across all firms are expected to rise by 5%, to hit £15.7 billion – and while businesses from all sectors scaled back their spending on advice – with retailers proving especially cautious amid falling consumer spending power – nearly every industry will increase their use of consultants in 2025.

In particular, Source anticipates pharmaceuticals and healthcare companies will see the biggest increases. Meanwhile, another survey conducted by Source found that almost three-quarters of companies plan to spend between 20% and 40% of their total investment budget on implementing AI technology – an opportunity which many consultants have been priming themselves to serve as ‘transformation partners’ for.

“Although we’re expecting a contraction in public sector spend on consulting this year, from analysing this sector through successive governments, we know that when those in the public sector need to get something done, but lack the skills or capacity to deliver, then they’ll use outside contractors to do that,” Nick Jotischky, head of market trends at Source commented.

The amorphous nature of the UK consulting market has historically made estimating its size difficult. The two leading annual reports on this come from the Management Consultancies Association, and Source Global Research. While the former uses membership data to inform its estimates, the latter surveys consulting firms over a certain size and revenue bracket. This leads to some variation between the two estimates – with the MCA estimating the market to be around £5 billion larger than Source.