Slowdown in consulting market

Date: 29-05-2008
Source: Consultant News

The UK consulting industry is no longer booming at the growth rates seen in 2005 and 2006. Growth slowed to 10% in 2007 and is expected to dip further in 2008; but rather than facing a dot-com style crash, the industry will instead experience a period of subdued growth for the next 1-2 years.

These are some of the key findings to emerge from the annual consulting industry report produced by the Management Consultancies Association. Entitled “The UK Consulting Industry 2008”, the report presents data collected from dozens of the leading consulting brands, plus a myriad of smaller niche players. As such, it’s the most authoritative data tracking the UK consulting industry.

However, in addition to the quantitative data assembled for this report, senior executives from around 80 leading consultancies in the UK were interviewed between January and March 2008. These interviews have allowed the MCA to gauge firms’ expectations for the coming years – and the picture being painted is one of more subdued growth, but growth nonetheless.

Encouragingly, the worst of the market conditions may already have been weathered by the UK consulting industry. In July 2007, growth was so strong that the firms were foreseeing a 2007 year-end growth figure of 20%. The fact that the outcome has been growth of only 10% highlights the severity of the slowdown that was experienced in the second half of 2007. By contrast, growth of 6-7% in the current year would feel reasonably buoyant – and perhaps explains why so many firms have restarted their recruitment drives in the last months.

Looking at the factual data for 2007, IT consulting and Strategy consulting were the big winners – along with several smaller service lines:

  Consulting Segment 2006 Fee
Income (£)
 # 2007 Fee
Income (£)
 % change
 IT Consulting
 Programme Management
 1,1021,187  8%
 Financial Advisory
 558 588 5%
 Outsoucing Advisory
 488 518 6%
 469 514 10%
 443 428 -3%
 Human Resources
 289 350 21%
 Business Process Reengeneering
 338 297 -12%
 Change Management
 170 263 55%
 Economic & Environmental
 20 57 186%
 Marketing & Communication
 21 24 14%
 Total 5,382 5,946 10%

From a resourcing perspective, it is intriguing to see that IT consulting headcount grew the slowest in 2007. So whilst hiring in “pure” management consulting broadly kept pace with revenue growth, hiring in IT consulting (+6%) lagged considerably behind the growth in IT consulting revenues (+16%). Fiona Czerniawska of the MCA stressed that this could point to a resourcing crunch in IT consulting during 2008. The launch of TopITconsultant in the last 12 months also looks particularly well timed against this backdrop of a growing war for talent in the IT consulting space.

  Consulting Segment # consultants employed by MCA firms in 2006 # consultants employed by MCA firms in 2007 % change
 Pure Management
 Consulting Firms
 15,965 17,53510% 
 IT Consulting
 10,879  11,493 6%
 Outsourcing Advisory
3,884 4,445 14%
 Total30,728  33,473 9%

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