London: The UK remains the biggest consulting market in Europe but Germany ran it close in 2011, driven by a buoyant domestic economy and the increasing international ambitions of German companies.
That is one of the headline findings in the 2012 Management Consulting Market Report, the definitive analysis of consulting in Europe, the Middle East and India, from specialist research group Source, published formally today.
The Source (Sourceforconsulting.com) EMEI report (1) says the consulting market across 11 major markets in Europe, the Middle East and India was worth €26.4 billion in 2011, up just under 4 per cent on the previous year. Levels of growth in emerging markets significantly outperformed those in most mature western consulting markets.
- Two-speed consulting market emerging
- Buoyant German economy drives consulting growth
- UK still biggest market, but flat at €6 billion
- Strong demand from manufacturing — automotive sector up 11%
- IT consulting is biggest service line
While the levels of growth were highest in the Gulf Cooperation Council (GCC) and Russia (both at around 20 per cent), it was Germany, already the second biggest in the region, which had the most positive impact on the market, growing by just over 7 per cent to €5.7 billion .
The UK consulting market, still the largest market across the EMEI, slowed after a strong start to remain static over the year. The consulting industries of Italy and Spain contracted by 10 per cent and 3 per cent respectively, reflecting the impact of the euro crisis
Meanwhile growth in the Indian consulting market, which was previously a star performer, slowed significantly, growing just 4.5 per cent between 2010 and 2011.
Across the EMEI region, the manufacturing sector recorded the highest levels of growth — up 8 per cent to €5.9 billion, with spending on consultants in the automotive sector up by 11 per cent.
Demand for consulting across the financial services sector softened over the past twelve months. On average, growth rates grew by 2 per cent in this sector, taking the market to €7.3 billion and banking and capital markets grew by 1.5 per cent, to €4.8 billion). The overall public sector consulting market (€3.2 billion) shrank by 3 per cent overall; but weak demand in western Europe was offset by strong growth in emerging markets.
Fiona Czerniawska, co-founder of Source said, "Our report finds that there is a two speed consulting market across the EMEI. One, which is mature and presently experiencing single digit levels of growth, and the much more dynamic emerging markets, which continue to show strong demand for consulting expertise.
"Going forward, growth will be greatest and fastest where firms are prepared to change their business models, rather than add new services. This may take several forms: for some firms, the opportunity will lie in finding different ways to bring innovative ideas to market, or by becoming the 'white label' supplier of services to firms with bigger brands. For others, the challenge will be to re-engineer the pyramid model, enabling firms to be more flexible in the way they deliver services to clients."
The service lines...
The report also found that IT consulting accounted for just over a quarter of all consulting (€6.8 billion) last year. Growth was higher in the next biggest market: formulating strategy (incl. M&A), which was worth €5.5 billion, up 5 per cent on 2010. Operational improvement was worth €5.3 billion up 4 per cent on 2010. The report says that this is reflecting clients' continued stress on productivity improvements and cost-cutting.
However, the highest growth of all was in helping clients with their own growth agenda. Although this is still a small market, demand leapt by almost 50 per cent to €960 million.
(1) The Source report focuses on 'big consulting'; done by consulting firms with more than 50 consultants, typically for organisations with a turnover in excess of €500 million. The major markets covered in the report are UK, Scandinavia, France, Germany, Spain, Italy, Benelux, Switzerland/Austria, Russia and Eastern Europe, India and the Gulf Cooperation Council (GCC)