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UK consulting urged to re-balance its income portfolio - MCA


London: The UK consulting industry was last week urged to wean itself off an overdependence on financial services clients as it seeks to navigate challenging economic waters.

David Coats, author of the Management Consultancies Association's (MCA) 2012 Industry Report, pointed out that financial services contribute almost 40% of consulting's private sector fee income. This was one of the most "striking phenomena" of the study, he told MCA members at the report's official launch.

"In part this reflects the balance of the UK economy. But it's (financial services) not 40%. Is it a business risk? Does consulting need to re-balance its portfolio?"

Coats added that the challenges of any such re-balance were compounded by the scale of the opportunities for consultants in financial services, driven by the financial crisis and regulatory change.

Data for the 2012 study were compiled in January and February this year, and whilst the overall message of the report is positive — fee income up 5% in 2011, recovery to pre-crisis levels — Coats did wonder if responses would be as "robust" if the same questions were asked again now.

"When I interviewed (contributors) your colleagues were optimistic — fairly. Who knows today?
"You have recovered from the worst (in fee income terms). But there is no return to double-digit growth of '97-2007."

Coats emphasised the degree to which private sector income growth had compensated for the fact that public sector work had "fallen off a cliff."

He speculated that, faced with the crash, clients had firstly, "Wanted to survive and push problems to one side. In 2010/11 they realised they were still there and began to address their challenges.

"Secondly, clients are buying the services of consulting to be fit for the upturn.

"So nominally you have weathered the storm. But given the (current economic) context — who knows?"

As well as highlighting the financial services paradox. Coats emphasised two other pressing challenges for the UK consulting industry.

  • Global reach: How can firms — especially medium sized and niche firms — develop global presence? How can this be accelerated?
  • Influencing policy: Is the value of the contribution made by consulting to the UK economy understood by policy makers at HM Treasury and the Department for Business, Innovation and Skills? "They need to understand what you do and why it matters", Coats commented.

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