Six-in-ten consultancies predict increased profits after successful AI implementation
The majority of consulting firms predict that AI implementation will see them hit profits in the coming year. However, less than a third said that investing in new technology was a priority for them in 2025.
The sustained slowdown in the consulting sector saw the UK industry’s collective revenue move into negative growth, according to Source Global Research – with the group’s most recent study suggesting the sector suffered a contraction of 3.4% in 2024. While the Management Consultancies Association – the other leading researcher into the size of the industry – has held back its estimations of the market so far, the organisation has also suggested it expects slower growth in 2025, as pressures on the industry persist deep into the year.
Amid this increasingly gloomy picture, Deltek has released its sixth annual Clarity report – and in contrast, has pointed to a silver lining around the clouds hanging over UK consulting. The research, conducted across UK-based consultancy, architecture, and engineering firms found that even though the consulting sector’s growth might have stalled, firms are leveraging technology and new working methodologies to maximise the money that is coming in.
An ultimately successful 2024 for consultancy firms saw 55% report that they hit a gross profit margin (GPM) of more than 30%. At the same time, despite economic headwinds, firms in the sector remain upbeat and ambitious, with 83% saying they believe they can increase profit growth this year. Meanwhile, even though the largest consulting firms are making headlines for reducing their headcount, 42% of firms overall said they were planning to bring in new talent to supplement their existing expertise.
One of the factors driving this confidence is still the excitement around artificial intelligence. Last year, around three-quarters of all professional services leaders surveyed told Deltek they believed that successfully implementing AI would give them a significant competitive advantage, while 74% said it could help to expand the services that they can offer, and 72% said it could boost their staff’s job satisfaction – and that positivity has carried into 2025.
In the consulting sector in particular, executives were most excited around the way they thought implementing AI could further increase profits. A 64% majority said they thought the technology would have this result – ahead of 62% of engineering leaders, and 57% of those in architecture. Most prominently, consultants expect this will come from improved operational efficiency – at 57% of respondents, compared to 48% and 43% in engineering and architecture respectively.
Neil Davidson, group vice president for the professional services sector at Deltek commented, “It’s promising to see that the shift in the use of technology is also underpinning greater confidence in tracking project metrics – something we have not seen in our past Clarity reports. The strides professional services firms have made in implementing advancements in technology, ahead of schedule, are further improving their ability to manage the factors that contribute to attaining KPIs. Successful tracking is vital for providing insight into core business metrics, the optimisation of processes, and supporting productivity to help firms ensure they stay on-track to meet their goals.”
But despite this apparent enthusiasm, the number of consulting firms putting their money where their mouth is, is comparatively low. When asked what their priorities will be for the coming year are, only 30% of consulting leaders said they would prioritise investing in new technologies, such as adopting AI – behind 42% of engineering firms, and 46% of architects. And only 32% of consultants said they would be prioritising the effective implementation of those technologies – again, well behind the two other industries. Instead, consultants were most likely to prioritise expanding into new markets, or boosting their client satisfaction levels.
While the use of AI and automation may be linked to attaining key performance indicators (KPIs) for project-based businesses in the UK, and improving client level satisfaction, this might also flag up a key concern for the consulting sector, when it comes to AI. Recent Eden McCallum research found that only one-in-ten consultants “always” used AI for their work, suggesting that while it has helped in some areas, for now at least, it is not trusted with heftier responsibilities at firms – something which might yet prevent it from yielding the boost in profitability that many firms clearly hope for.
