Tamzen Isaksson of the Association of Management Consultants says demand in this sector is declining. Credit: PA Images/Alamy Stock Photo
Tamzen Isaksson, chief executive of MCA, also notes that headcount in the sector has increased by 16% in recent years amid a surge in demand that is now cooling off.
A significant increase in the number of employees can lead to companies being overwhelmed in certain areas where demand has fallen, such as M&A advisory services for private equity clients.
Some have already begun to adjust the size of their businesses to accommodate an era of weaker growth as inflation and higher interest rates weigh on the global economic outlook and clients cancel projects and demand lower fees.
In March, Accenture said it would cut 19,000 jobs worldwide, putting hundreds of jobs in the UK at risk.
Consulting giant McKinsey plans to cut about 2,000 jobs in the US in one of the largest rounds of layoffs. KPMG, EY and Deloitte have also cut jobs or restructured their US operations.
Ian Elliot, PwC's director of human resources in the UK, explained the reason for the firm's decision to cut wage and bonus allowances.
In a memo to employees, he said: “Financial rewards are an important part of the ‘Deal’ we offer and we are committed to rewarding you fairly by striking a balance between consistency in approach and the financial strength of the firm.
“Our decisions on this matter also depend on the firm's performance and external market conditions. While there is strong growth in many areas of our business and we continue to invest in the future, the market environment has been challenging.”
He added that this would lead to lower wage increases and reduced bonuses. per employee.
The main problem facing consulting firms is how much large corporate clients are willing to spend on professional services in a tougher economic climate.
In the UK, economists have warned that a recession is inevitable due to the Bank of England's inability to control runaway inflation.
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Accenture has blamed its weaker results on big tech companies, which are themselves cutting tens of thousands of jobs and spending less on external consulting services. Meanwhile, earlier this year, Goldman Sachs also said it would cut spending on professional services in 2023.
A recent report on the US consulting industry by Source Global Research found that more than 75% of professional buyers have canceled some existing projects or abandoned new ones, while two-thirds have suspended most ongoing work.
Source Global reports that cybersecurity, HR and transaction advisory are struggling while demand for IT advisory services continues.
Chiaki Nishino, president of North America consulting firm Prophet, told Source Global: “Given the current uncertainty in the economic environment and shrinking client budgets, projects are being broken down into smaller chunks. I doubt we've seen the worst or the best in the market this year.”
Meanwhile, the Big Four firms KPMG, PwC, EY and Deloitte were quick to jump on ethical standards. , social and governance (ESG) as companies strategize to go zero.
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In 2021, PwC has placed ESG at the center of its $12 billion investment plan, which will see the firm create 100,000 jobs over five years. This included creating “institutions of trust” to educate clients on ethics.
At the time, Bob Moritz, the firm's global chairman, said the move would see the firm redefined and rebranded “to make sure we're valued for what what our customers need and what the world needs.”
However, as clients are now being forced to tighten their belts, there have been questions about whether demand for ESG advice will continue after large investments by companies in this area.
One City executives expect the use of external sustainability consultants to decline next year as economic conditions require companies to focus their resources elsewhere.
While British consulting firms have yet to cut costs as aggressively as their US counterparts, it is clear that after years of rapid growth, the industry is entering a challenging period.
This could soon create problems for some of the city's largest employers and present bosses with difficult decisions.
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