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UK firms see boost in demand, confidence, fees, hires - says MCA

Alan Leaman, MCA

London: Consultants' confidence in the UK's economic growth prospects has jumped over 50 per cent in a year, according to Management Consultancies Association (MCA) research.

A new MCA report, published yesterday, says that market conditions have significantly improved over the last twelve months — with two thirds (66 per cent) of MCA member firms reporting that market conditions are positive this year, compared with just 18 per cent in 2012. Confidence in the UK economy has also risen dramatically — 63 per cent of firms are 'confident in its growth prospects' this year compared with 9 per cent a year ago.

The majority of MCA member firms are also experiencing increases in fee income with almost three quarters (72 per cent) seeing their income rise markedly (+ 5 per cent), or slightly (1-5 per cent) in the first six months of 2013. Only 16 per cent of firms reported a reduced income, a drop from a quarter last year. Three quarters of firms report that they will increase their numbers of consultants this year.

Consultants anticipate growth in work in financial services, energy, mining and utilities, and manufacturing. The report says that the continuing importance of financial services to consulting revenues shows how central consultants are to developing a more stable financial industry in the aftermath of the financial crisis of 2008. Consultants' presence in sectors such as manufacturing also shows their deep involvement in rebalancing the economy.

The MCA anticipates that UK management consulting fee income will rise by 6-7 per cent in 2013.

Alan Leaman, Chief Executive of the MCA, said, "The significant rise in optimism amongst MCA member firms this year is encouraging. Consulting firms can see that some of the challenges of the last few years are probably permanent conditions — and are adapting to them. They are hiring staff and adding new capabilities. Our industry is helping clients as they move from both the over-optimism pre-2008, and the gloom of the recession, towards a new pragmatism and vigour."

The report also says that the picture for the public sector is more nuanced. Local government consulting remains depressed due to the downward pressure on council funding. Expectations of central government consulting growth are also limited. Consultants see very modest potential growth in the health sector as it adjusts to legislative changes and widespread institutional reform.

Leaman, commented, "What is needed in the public sector is an honest recognition on both sides that the need for consulting capability exists — and that it adds value. Many of the most important public sector initiatives would simply not have happened without consulting. Consulting has made a positive contribution to public services and, as spending starts to recover from a battering over recent years, ministers need to explain this fact to the wider public."

Strategy consulting on the rise

Businesses' reductions in discretionary spend and a "crisis" mentality immediately after 2008 adversely impacted strategy consulting. But, as the economy starts to recover, clients are switching their attention to how they can drive innovation through new products and services. As a result, almost three quarters (70 per cent) of MCA firms expect strategy fee income to rise markedly (+5 per cent) or slightly (+1-5 per cent). This is almost a 10 per cent increase on the previous year.

International work continues to grow rapidly

Almost three quarters (72 per cent) of firms are doing more international work now than they were five years ago. Almost a tenth have grown their work overseas by more than 30 per cent over this period. Consultants view the Eurozone, notwithstanding sluggish growth and emergency bailouts, and BRICs as key overseas markets. The report says that the Government has started to understand the export potential for consulting with its recent industrial strategy identifying UK professional services as a growing area for overseas sales, and the role of consulting within that drive for export-led recovery.

Alan Leaman said,"These figures are very encouraging but this optimism should not be overstated, any more than the fragile state of the recovery itself. Consulting firms are experiencing an improvement in market conditions but they continue to face tough pressures on costs and prices."

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