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Big Four turn to job cuts amid consulting slowdown

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The UK consultancy market is stuttering. A new report, based on input from the Big Four, predicts the consultancy sector may fail to grow for the first time since 2020 as global businesses cut back on spending.

20th Mar 2024
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The projection is from an annual report on the consulting market by Source Global Research, with data from Deloitte, EY, KPMG and PwC.

The report estimates the retail, telecoms and pharmaceutical and manufacturing sectors will slash spending on corporate advice, causing a rare pullback in a £16bn sector which has flourished in the wake of the pandemic.

Spiralling inflation, geopolitical risks, multiple elections and prolonged economic uncertainty caused consultancy market headwinds last year, trimming growth to 4.7% from 15.6% in 2022.

EY called off its demerger but has pushed ahead with jobs cuts, whilst EY, KPMG and PwC have also axed thousands of consultants, partners and lower level staff in response to the difficult economic conditions.

Dramatic slowdown

The report said businesses endured a “polycrisis” last year.

“This created huge levels of trepidation for clients, resulting in hesitancy when looking to put new consulting contracts out to tender,” the report found. “With clients continuing to adopt a wait-and-see approach to understand where to act if the economy begins to recover, we expect similar levels of hesitancy in 2024.”

A drop in UK inflation from 4% in January to highs of 11.1% in October 2022 will not prompt businesses to spend on strategic advice, the report claims.

“With clients continuing to adopt a wait-and-see approach to understand where to act if the economy begins to recover, we expect similar levels of hesitancy in 2024, particularly with the upcoming general election complicating public sector spending,” the report said.

The 2020 lockdown year aside, Source Global predicts this year to be the UK consultancy market’s worst since it started tracking the market in 2014.

“We anticipate growth to slow across all sectors this year — and in some cases, dramatically so,” said James Beeby, research lead at Source Global. “The market is therefore set to become both tighter and more competitive, and this will make it even more important that consulting firms demonstrate where value is being added.”

Last year the financial services industry accounted for £5.86bn of the market, whilst public sector contracts made up around £1.89bn. Uncertainties surrounding the UK election are likely to slow growth, the report found.

Separately, a survey of consultants published by the Management Consultancies Association in January estimated that activity in the UK market would grow 9% this year, falling from 11% in 2023.

Opportunities in the gloom

In response, consulting firms of all sizes must do more to stand out from the intense competition, said James Ransome, principal at Patrick Morgan recruiters.

“Despite challenges, opportunities emerge, notably in cybersecurity, which saw significant growth in response to escalating cyber threats,” he said.

According to the report, cyber security was the fastest-growing business line for the consultancies, rising more than 17% from 2022 to £1.7bn. Companies are more willing to spend on areas such as operational resilience and incident response advice, the report found.

The Big Four firms dominate the market for business advice and their collective health is often considered a bellwether for the wider economy.

However, the last year has brought pay freezes, smaller bonuses, hiring pauses, and costly abandoned restructuring attempts.

Since February 2023, Deloitte, EY, KPMG, and PwC have let go of more than 9,000 employees through various rounds of layoffs across the UK and US, with job cuts also reported in Australia and Canada.

US consulting giant McKinsey recently handed unsatisfactory performance ratings to around 3,000 staff, according to reports.

Last year the firm asked partners to defer some of their pay through the downturn. The company also cut 1,400 largely back-office employees last year, reduced the pace of promotions and trimmed in-person training and retreats.

‘Simplify the storefront’

EY’s doomed bid to spin off its consultancy arm has not put its rivals off their own ambitious restructuring plans. Deloitte is to reduce its business divisions from five to four as part of its largest workforce overhaul for more than a decade.

The restructuring will take at least a year, and will involve the entire business in every country it is operational, according to the Financial Times.

Bosses are framing the remodelling as an attempt to simplify business lines and “free up” partners to spend more time with clients than managing staff.

“We recently completed a thoughtful process to modernise and simplify Deloitte’s storefront and go-to market strategy,” the Big Four firm said in a statement.

“We are confident this will further enhance the exceptional quality and value we deliver to our clients and communities, as well as the vibrant career paths we provide our people,” it said.

In September, the firm said it would cut 800 roles from its UK consulting, financial advisory and risk advisory arms, before considering another 100 job losses in February. 

Deloitte’s global businesses currently consist of audit; enterprise risk services; tax and legal; consulting; and financial advisory. Following the restructure, this would become audit and assurance; strategy, risk and transactions; technology and transformation; and tax and legal.

Meanwhile, KPMG has said it plans to invest “tens of millions” of dollars to help corporate legal departments streamline operations, including implementing generative AI, said Stuart Fuller, KPMG’s head of legal services.

The technology eventually will “take away part of the core business model” for law firms by automating routine tasks usually assigned to junior lawyers, he said.

Replies (3)

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By petestar1969
20th Mar 2024 11:00

The Big Four making less money? Excuse me while I go and get my violin.

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Replying to petestar1969:
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By FactChecker
21st Mar 2024 00:25

If it's not a Stradivarius they won't let you play it within their earshot!

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By FactChecker
21st Mar 2024 00:30

Apparently they use the same strange language they invented to obscure all meaning even when describing their own plans ...

“We recently completed a thoughtful process to modernise and simplify Deloitte’s storefront and go-to market strategy. We are confident this will further enhance the exceptional quality and value we deliver to our clients and communities, as well as the vibrant career paths we provide our people.”

In other news ... a cow was heard to say "moo" - but no-one listened to her either.

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