London: The Benelux consulting market continued to struggle in 2012, dropping by 3.1 per cent to €1.87billion compared to 2011. The Netherlands is the largest of the three markets and the one that declined most over the past twelve months — down 3.5 per cent to just under €1.2billion, according to new research by consulting market specialist Source Information Services.
Source's new Benelux report also shows that the Belgian market declined by 2.5 per cent to €621million and Luxembourg's market declined by 2.7 per cent to €75million. The majority of consultants interviewed across the Benelux region defined standing still as success.
The report argues that the economy of the Netherlands, like that of Luxembourg, is more biased towards financial services and has been suffering more from the financial crisis than Belgium. Financial services consulting across the Benelux region fell by 7.4 per cent.
Edward Haigh, a director of Source and an author of the report commented, "The challenging economic situation — manifested in indicators such as increasing unemployment, widening deficits and weak GDP performance — means lower demand for consulting and a very cautious approach by clients in what is a mature market. Consulting firms are having to run just to stand still."
"Quite a few of the consultants we interviewed also pointed out unmistakable signs of over-supply in the market."
Public sector consulting falls by over 10 per cent
Public sector consulting fell by just over 10 per cent across the Benelux region last year. This area of consulting was hit by the elections across the region in 2012. This was particularly true in the Netherlands, where a caretaker government was in place for seven months of the year whilst the election and the formation of a new coalition took place.
The Source report says that although it suffered a small decline, it is telling that operational improvement work outperformed the market as a whole, contracting by under one per cent. When seen alongside far more precipitous falls in strategy consulting (-6.8 per cent) and HR consulting (-8 per cent), this gives some indication of the extent to which Benelux clients remain in efficiency mode.
The impact of globalisation
The report also identifies a further trend. It says that at the very heart of Europe, Benelux had historically benefited from the centripetal force which led corporations to set themselves up where the big decisions were being made. But globalisation and the need to maintain competitiveness now means that many clients are moving headquarter functions out of the region. This, together with the depressed economic situation, impacts the amount of work available to be won.
Consulting clients highlighted the opportunities presented by the current wave of technology developments, such as big data and analytics, as well as cloud and mobility. But, many consulting leaders recognise that the market is unlikely to bounce back before 2014, and there is a need to find more inventive ways of finding growth. Some are exploring the top end of the local mid-market segment. Edwin Baints at Mercer, who was interviewed for the report said, "We are seeing growth in the market for larger local companies with 250-500 employees. These companies rely on our expertise, so we have focused on them to generate growth."
Jacques Pijl of Turner concluded, "We're now focused on our plans for overwintering, organising ourselves to take advantage of growth when it comes, while for the moment remaining Calvinistic and grounded."
"Our best guess is that the market will pick up — originally we thought it would be half way through 2013, but the recent economic news hasn't been great so now we're expecting the improvement in January 2014."
For the full report go here.