Activity within the management consultancy sector has been somewhat cyclical in recent years. Immediate uncertainty in the aftermath of the EU referendum in 2016 prompted caution amongst many firms, leading to falling expenditure on discretionary services. Activity levels have since picked up, with the sector reaching record turnover levels in the months before the onset of the Covid-19 pandemic. Nevertheless, with the virus facilitating that same sense of caution amongst businesses, falling levels of expenditure on management consulting services are likely to be seen once more, threatening instability for firms in the sector.
The pandemic has further presented a decline in M&A activity. In the face of unprecedented business hurdles, much attention has been focused on the management of firms’ own operations, rather than considering those of others with the view to potential acquisition. This is set to have wide-reaching impacts on other professional services firms, affecting activity in the legal, deal advisory, audit and assurance fields.
Away from the pandemic, further hurdles to the business services sector have arisen from changing demand patterns from clients. For instance, technological development and modern working practices have given further rise to the ‘freelance’ consultant in recent years, providing additional competition to larger firms, while meeting clients’ desire for flexible, cost-effective expertise offerings.