Mind the (closing) gap

By Edward Haigh

I hate to be the prophet of doom, but...

According to our new report, the UK's consulting market surged forward in 2013, growing an impressive 4.8% to a value of just under £5.6bn. That means the UK is almost certainly the second largest consulting market in the world, despite the UK economy being a few places further down the list.

So what could I possibly find to moan about? Well, the trouble is that it all looks a bit unconvincing at the moment. For a start, UK clients are more cynical about consulting than their counterparts anywhere else. This, for example, was the divisional head of a major UK bank talking to us recently: "We're now challenged about whether we've looked internally for a solution, or at the temp market. In fact, frankly, they'd rather we went looking anywhere else other than a consulting firm." Stern stuff. And that's reflected in harder data about buying patterns, too: where the trend globally is moving towards a greater use of consultants, UK clients appear to be heading in the opposite direction. Last year, amongst the UK clients we heard from who said they'd be undertaking some sort of major growth-related initiative in the next 12 months, 46% said that would lead to a use of consultants. This year 35% said the same thing.

Does that mean the UK's consulting market will contract in 2014? Almost certainly not. Why? Because the hard reality is that clients simply have too much to do and too few people to do it with. They shed people during the downturn and despite a relatively resurgent economy they remain a little too nervous to start recruiting in earnest again. They've got gaps, and they're filling those gaps with consultants. Whenever we take a reading of the global consulting market to assess the proportion which is attributable to the provision of contingent labour (or, to put it slightly less delicately, to bodyshopping) we find it's consistently about a third. I suspect at the moment it could be considerably higher in the UK, particularly in places like the financial services sector.

Perhaps consulting firms shouldn't worry too much: after all, business is business, wherever it comes from. But I'm not so sure. Sooner or later you've got to reckon on confidence returning to a point where clients start to bring things back in house. Sooner or later they'll stop paying top dollar to avoid taking a risk. And if that's an argument which holds water then sooner or later consulting firms  in the UK are going to have to work out what they have to offer a bunch of cynical clients who don't have half as many gaps any more.