UK consulting firms are bracing for another year of challenging economic conditions, with many pushing hard to attract overseas clients as services exports continue to outperform the wider economy.
Last year, Britain’s consulting market as a whole failed to grow for the first time since 2020 as concerns over the resilience of the economy and political tensions led companies to cut back on hiring outside experts.
But when it comes to exports, consultants seem to be doing much better.
According to the Office for National Statistics, total services exports grew 74 per cent between 2016 and 2024, over the first to third quarter period, while management consulting services exports rose 114 per cent (data for the fourth quarter of 2024 will be released in April).
This has left experts wondering if the consulting sector can punch above its weight and unlock growth for the UK.
Fiona Czerniawska, founder and chief executive of Source Global Research, a consulting sector analyst, says there is great respect globally for the “traditional management skills” of UK consultancies. As a result, firms have “already been exporting and making connections in other countries and are set to grow more internationally” in the face of flatlining growth or contractions in some sectors at home.
While the wider consulting market is finally starting to recover, analysts warn a muted economic outlook for the UK may be an obstacle to firms seeking to get back on their feet.
At the same time, as firms become more adept at overcoming geographical barriers by shifting services online, more could settle outside London, thereby helping to tackle regional growth gaps between the north and south east of the country.
Last November, chancellor Rachel Reeves announced her vision for the UK’s new industrial strategy, with the aim of “capturing a greater share of internationally mobile investment in strategic sectors and spur domestic businesses to boost their investment and scale up their growth”.
Professional and business services was identified as one of eight growth-driving sectors. Czerniawska welcomes the move but adds that “the government needs to understand the value that [the consulting] industry and the professional services in general bring the UK economy”.
According to the Management Consultancies Association (MCA), a trade body, the rise in services exports continued in 2023 with 28 per cent of fee income for consultants now coming from abroad — an increase of £3bn in five years.
This has been spurred by international demand for British-based expertise in both traditional areas and new and emerging high-growth sectors, the MCA says.
But how exposed are consultancy firms in the UK to global challenges, such as the trade war initiated by US President Donald Trump, post-Brexit constraints on movement and economic volatility?
Strong interest from the US in technology could in fact open up opportunities for companies, as the Trump administration seeks to draw top tech talent from overseas, such as by launching new visa schemes.
“Given the potential for the US to explode in terms of innovation, they are going to want to pull people in,” says Czerniawska. “It will create an opportunity for greater freedom of movement on the services side.”
Companies looking to fill staffing gaps and hire skilled people on a short-term basis will further fuel demand for consulting expertise, she adds.
Tamzen Isacsson, chief executive of the MCA, says the move of services online during the pandemic led to an important internationalisation of operations that has held fast ever since. Consulting services exports doubled during the crisis, according to MCA data.
The consulting services sector is now outperforming the UK economy with 6.4 per cent growth forecast for this year and 9 per cent next year, based on MCA research.
High growth export sectors for consulting services include energy and resources, as companies seek to navigate the energy transition and while those businesses benefit from raised commodity prices, according to Source.
Management consulting exports grew by 85 per cent between 2015 and 2022, with output growth strong in that period, says Emily Fry, a senior economist at the Resolution Foundation, a think-tank.
The question of regional distribution is “particularly interesting” to the UK’s growth ambition, according to Fry. New data shows there was faster growth in exports of professional, technical and scientific services in Scotland and the east of England between 2016 and 2022 than in London.
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Growth in the sector was more dispersed than in other categories such as financial and insurance, information and communication — big workhorses for the economic strategy — nodding to the potential role of these services in redistribution.
Fry says the move to bolster exports started after Brexit, when some consultancies began setting up subsidiaries overseas, which may be partly in order to be able to deliver services within the rules of the Brexit agreement with the EU.
Despite the headwinds, consultancies see a clear opportunity in the year ahead.
James Hadley, UK managing partner at Bain & Company, says there is “strong and growing demand” from clients seeking help to reinvent themselves as they respond to “critical areas of disruption”, such as artificial intelligence, rethinking supply chains and the energy transition.
The UK is an important hub for the firm’s business in Europe and globally, he adds. “We’re actually extremely optimistic for future growth in the UK. The UK has huge strengths.”
