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Big Four boon as UK consulting fee income rises

Strong performance from the UK consulting industry, as the Big Four outshine the rest

UK CONSULTANTS saw a hike in fees during 2014, with the Big Four outperforming their competitors, according to the industry body’s latest report.

Management Consultancies Association (MCA) members, which include the Big Four’s consultancy arms, posted £5.2bn in fees during the last year, up 8.4% on the previous period. The Big Four’s consultancies grew by 10.75%.

The MCA’s member growth was faster than the majority of every other economy sector, with their members making up over half (60%) of the UK management consulting sector.

Although the MCA has not released a fee income figure for the Big Four, Accountancy Age’s Top 50+50 2014 survey showed they earned £2.7bn.

Consulting has become a huge focus for the Big four in recent times. Only last week KPMG and EY made further consulting acquisitions.

The annual report, an assessment of the consulting industry’s performance, showed that digital consulting remains the largest area of consulting activity. Most of that activity surrounds financial services, retail and energy, and figures show it rose to over 27% to £1.4bn, which is up 2% from last year and a total of 8% from two years ago, according to MCA.

Across MCA member firms, consultants’ number increased by 12% in 2014, to 38,000. There was a rise of more than a quarter (26%) of digital and technology consultants, to nearly 10,000, yet two years of fast growth in consultants and demand has not been enough to prevent fee income per employee rising again in 2014.

Strategy consulting, which last year accounted for 7% of consulting activity, saw growth of 44% in 2014, and now makes up a tenth of all activity. Financial services saw growth last year, and remains the biggest private sector buyer of consulting services. The MCA research also shows that consulting work in general has increased by 43%, with members involved in major UK projects.

Income from the public sector, similarly to 2013, is around £1.1bn, lower than the previous £1.8bn at the start of last parliament. Yet firms who supplied returns across 2013 and 2014 show 9.8% growth between both years, with those interviewed in the report suggest that this is due to officials adopting a new long-termism.

Public sector image problem

The development of public advice, making it more focused on transformational change and less about saving failing services, was also picked up on by consultants.
Consultancy growth, while welcome news for the MCA, has a far less positive reception when associated with certain institutions. Last year, the NHS came under scrutiny as spending on management consultants doubled after the coalition.

According to The Telegraph, spending increased from £313m to £640m from 2010 to 2014, despite promises for a clampdown.

However last year in Consultancy.UK, in defence of the NHS’s spending on consultants, MCA CEO Alan Leaman said: “The NHS spends 0.3% of its budget on management consultancy and the vast majority of this goes on projects that save the NHS money and improve patient care.” He added, “On average, for every £1 spent on management consultancy, benefits worth the equivalent of £6 are returned to the client.”

On the latest figures, Leaman, said that there was “a long way to go” before the relationship between public buyers and the consulting industry is improved, but added: “The reforms instituted by the last government means that buyers are getting better at securing what they need and targeting their spend effectively.”

Author of the report and director of the MCA Think Tank, Paul Connolly, said: “UK consulting continues its recovery at a rate faster than the wider economy, including most other professional services. Consultants are supporting businesses in getting ‘match fit for growth’ – either through developing existing capabilities or through launching new propositions.”

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