In a time of slow economic growth, MCA consultancies are showing that they know how to adapt to the new economic climate and its uncertain conditions. This helps to explain the industry’s success at a time when many other industries are not growing.
Although the amount of fee income that management consulting firms earn has grown every year since 2009, the industry only regained its 2007 fee income levels in 2012. This shows that there is still a way to go until the industry has completely recovered from the recession.
The industries that have used management consultancy the most in the past year are financial services (banking, insurance) and the public sector (central and local government) with construction and transport and retail growing the most rapidly.
Looking at the past year, most of the growth in the UK economy has come from financial services. In the short term this is a positive benefit to management consulting because the financial services has historically been the source of a high percentage of fee income for consulting firms. In the long term the industry will need to find other openings so that it doesn’t rely on financial services so heavily.
Research collected by the MCA suggests that new openings could come from adapting to customer demands and new technology. For example, using technology to remotely monitor health care or using social media to engage better with customers.
Retail has been a real source of growth for the consulting industry. This may seem surprising considering the depressed outlook of many UK high streets. But behind the scenes, shops on the high street are changing and adapting the way they work to suit their customers’ preference to shop online.
For the retail sector to make a success of easy and accessible online shopping for its customers, high quality IT support is really important. Consultants are able to offer advice on issues, for example how to redesign the way a business is run, how to manage a large property portfolio or how to implement a new IT system.
MCA consultancies expect the growth in service industries (including retail) to increase significantly in 2013 so the growth in the retail sector will be an interesting development to monitor.
Supply chain management
Supply chain management (organising how goods are delivered from one place to another) continues to be a real problem in many industries. The horse meat scandal was a very public example of the risks associated with global supply chains, where producers are responsible for the end product and everything that has gone into it.
Quality of service and products is firmly back on the agenda for management consultants. There are still great opportunities to offer good advice on how to manage supply chains both internationally and in the UK.
Challenges and opportunities for the sector
The MCA surveyed its members in 2012 to determine what the risks to growth in 2013 were. One of the main risks identified was weak economic growth in the Eurozone and political uncertainty across the EU. This is a risk for the consulting industry because clients want more work but at a cheaper rate.
As growth in the Eurozone has not picked up and the UK has not completely recovered from the recession, this had led many consulting firms to find work in other countries. Emerging economies are continuing to expand and UK based multinationals are often using UK based consultants to undertake work in their overseas operations.
Another important challenge for 2013 is helping the public sector to do more with less. Since the change of government in 2010, the public sector has spent a very limited amount on consultants. This is because its budgets have been dramatically cut.
The good news is that spending is now starting to increase, but it is nowhere near the levels for the pre-2010 period. However the public sector has recognised that it can benefit from high quality external advice and support in order to maintain and/or improve the services offered to the public.
The clear story to emerge from analysis of how the industry performed in 2012 is that any financial collapse in the public sector or financial services will have a negative effect on management consultancy because more than half of all revenue across the industry comes from these two industries. This is also an opportunity for consultancies; they know both of these sectors incredibly well and it is a chance to respond creatively to changing demands from their clients.
What does this mean for graduates entering the profession?
Overall, clients want more for less. For MCA consultancies, they have helped their employees to adapt to the needs of their clients which has helped to keep the industry growing.
For graduates the key message is to be enthusiastic about new opportunities and ways of working and be open to getting new skills sets. Management consultancy is a vibrant industry and benefits from the knowledge and creativity of graduates.
The current economic climate continues to offer up challenges and problems that require expertise and insight to tackle them, and management consultancy is where many of the solutions lie.
The MCA’s Industry Insight Centre (IIC) provides authoritative data, easy-access insights and interviews with key players in the UK consulting industry.