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Brexit hits growth in UK consulting, despite Brexit consulting boom

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Brexit has had a negative impact on the performance of UK consulting firms. That is the key finding in Source Global Research's new UK Consulting market report, published today.

In 2018 the UK consulting market grew by 5.6% to £8.2bn--a further decline in the growth rates recorded in 2017 (6.1%) and 2016 (7.5%).

  • UK manufacturers spend over £1bn on consultants to deal with Brexit and Trump's protectionism
  • Growth in huge financial services market slows after MiFID II and GDPR deadlines pass
  • Digital work accounts for almost half of UK consulting revenues

Although the UK consulting market grew more slowly in 2018, some consulting firms reported a bumper year; however, others found the market very challenging as ongoing uncertainty has caused some clients to delay large programmes.

This mixed picture is highlighted throughout the report:

  • Manufacturing was one of the fastest-growing sectors in 2018--up 7.1% to just over £1bn--as clients needed help dealing with widespread disruption as Brexit looms and Donald Trump's protectionist stance threatens exports.
  • In contrast, growth in the huge financial services market slowed--up 5.3% in 2018 (compared to 6.9% growth in 2017). Consultants faced squeezed client budgets and a reducing appetite for large-scale regulatory work after MiFID II and GDPR deadlines passed.
  • However, some sectors did outperform their 2017 growth, with consultants serving public sector (up 4.5%), energy & resources (up 5.7%), and retail (up 7.6%) clients all enjoying a better year in 2018.

Source Global Research, the leading research and strategy firm for the global professional services industry, also found that from a consulting service line perspective, Brexit uncertainty was a great driver of operational improvement work as clients looked to reduce costs and simplify internal processes. Operational improvement work grew 6%, and work in 2019 in this service line is forecast to rapidly increase, with an 11% growth rate expected.

Zoë Stumpf, Head of Market Trends at Source Global Research, said: "Brexit, inevitably, is one of the reasons for this mixed experience in the market. This is partly because ongoing uncertainty has caused some clients to delay large programmes and partly because some are feeling the heat from falling exports, declining foreign investment, and inflation.

"However, Brexit has had a positive impact on some markets, with consultants in the manufacturing sector, in particular, reporting good levels of work around supply chain design and supporting clients in preparing for potential changes in tariffs and increased border friction."

The Source report also found that clients are continuing to invest in digital solutions, with digital work now accounting for almost half of all consulting revenues in the UK. The report says that despite Brexit-related market pressures, clients are investing in digital to address customer needs more effectively, as well as to optimise the back office.

Olly Benzecry, UK&I Country Managing Director at Accenture, said: "Sixty percent of our business is now digital in the UK, and it's reaching the tipping point where everything becomes digital."

2019 and beyond

For the time being--any new shocks notwithstanding--Source expects 2019 to be a slightly better year than 2018, forecasting a 7% growth rate as a result of the many disruptive forces that clients are having to deal with.

Zoë Stumpf added: "We share the view of consultants that growth is likely to be reasonably positive in 2019, but we do have concerns for the health of the UK market in the longer term, given that Brexit has the potential to have a further negative impact on the economy and that clients could be so busy dealing with the fallout that they may lack the energy for wider--and demand-generating--transformation work."

For more information on Source reports contact ella-sian.jolley@sourceglobalresearch.com, telephone +44 (0)20 3478 1204, or visit www.sourceglobalresearch.com.

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