Huntswood: The state of the market – Q4 2011

Many of you may be feeling negative about the global economy at the moment; at the time of writing this, news stories and commentaries on the global economy seem to say we are at a difficult point. Although there is truth in some of this, much of the management consultancy sector is buoyant. Even in areas where it is struggling, management consultancy firms are engaged looking at specific issues in organisations and are making real positive impact. Roland Berger, the strategy consultancy, this week published its roadmap to save the Greek economy, based around a “central holding company to take over Greek state assets, such as ports, airports, highways and real estate, worth a total of about 125 billion Euros” (Consultant-News, 2011). It is white papers like these, and many more that you can find at SourceforConsulting.com, that both drive the management consultancy industry and also hugely support the global economy.

The UK consultancy market is, generally, doing well. The Management Consultancy Association (MCA) has said that over the last half year, their member firms together have achieved 11% growth – what seems a staggeringly high figure. Commentary around this figure has suggested that this level of growth is not representative across the whole market; Tony Restell, founder of top-consultant.com, posits the view that the firms that have been flagging of late are under-represented in the MCA membership. Whatever the truth, whether we are seeing growth of 5% or 15% in the management consultancy market, it is good news for the industry.

How are individual firms performing? September is the end of the financial year for KPMG and EY, so we will see their full year results in due course. Across the other members of the Big4, PwC have seen a 10% growth in consulting in the UK (6% across the whole UK business). Deloitte’s global consulting business has released growth figures of 14.9%, although obviously this is across all geographical markets. Of the other large firms, Accenture has seen a 16% growth in consulting revenues globally.

Some of the smaller consultancies have had a similarly good time. Qedis, the cross-sector IT advisory firm that are members of the Highland Worldwide network, have hugely outperformed the market, seeing a staggering 40% growth to £18m revenues in the UK. They have also been placed 7th in the Sunday Times “Best Small Company to work for”. Baringa Partners have seen turnover increase by 38% to £38m, supported by a 42 per cent rise in head count, and Navigant have grown by 12%. Maybe the MCA growth figure is too conservative?!

Elsewhere, the MCA has published a report on young management consultants, and how they are finding working in this industry. The most interesting statistic in the report was that, overall, young consultants are experiencing a better “work/life balance” and are travelling less than they expected to. This shows that firms are both managing candidates’ expectations effectively, but also are implementing good solutions to enable their work force to be flexible with work and travel. However, one worrying aspect from this report was the tendency for women to leave their career in consultancy much earlier and in higher numbers than their male counterparts.

Nobody will be surprised to hear that McKinsey have once again been voted the most prestigious consulting firm, for the tenth year running! Indeed, the whole of the top-10 is unchanged, although there have been some movers this year. The 2011 Top 10 Most Prestigious Consulting Firms according to the ranking are McKinsey & Co., the Boston Consulting Group, Bain & Co., Booz & Co., Deloitte Consulting, PricewaterhouseCoopers, Monitor Group, Ernst & Young, Mercer LLC and Accenture. “McKinsey is the consulting industry’s gold standard,” said Brian Dalton, director of research and consulting at Vault.com

Finally, the story to watch was broken by City AM on its front page on Thursday 27th September; the European Commission has set out draft regulations that will force the Big4 to “hive off their huge consultancy arms or ban them from cross-selling services to their (audit) clients.” Although no timelines have been set out for a consultation period, this is a story to keep a close eye on as the repercussions of even the most minor of recommendations in the regulations would have significant impact on not just the UK, but the global consulting industry. EY and KPMG have more to lose from such a decision as they have invested very heavily recently on the growth of their consulting arms. Furthermore, Deloitte and PwC, who have the largest consulting revenues, have focused their consulting work largely on companies that are not audit clients. This would shelter them from much of the impact that some of the lesser regulations would impose.

Growth markets
My sense of the market is very much one of stabilisation; conversations with businesses in the financial services sector indicate a slowing down in decisions, and some organizations putting projects on hold. This is not to say that things are looking down, but that the growth surge that many of us have seen in the last 18 months is slowing in financial services.

Conversely, although the gates are still shut in central government, the other public sector markets are on the uplift. I have even been hearing of a number of new projects in policing.

Broader private sector and work with corporates remains strong, with consulting in manufacturing environments leading the pack.

Hiring trends
The top-consultant.com half year hiring trends report sees 81% of consulting recruiters expecting hiring in 2nd half of 2011 to be equal or up on the first half of the year. I would agree with this sense, but airing on the side of “equalling” as opposed to much “up”.The Economic Times recently ran with a story on hiring in the Big4 that said: “The world’s two largest accounting and consulting firms are bulking up with acquisitions and combing the globe for new hires. Head-to-head in a race for the title of world’s largest private professional services firm, Deloitte and PwC are on a major expansion drive.” It will remain to be seen what impact the previously discussed regulations have on this news. Small firms are winning large amounts of work, the Big4 continue to seize market share and the strategy firms are beginning to move down the value chain. However, the doors are open across the consulting industry, and the talent war continues to rage.

Until the next quarter, enjoy the market!

Stephen Humphreys, Recruitment Manager, Huntswood
Email: [email protected] ; Tel: 0118 971 8467

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