Consultancy - US downturn begins to bite

Members of the Management Consultancies Association have reported revenues of #1.09bn for the first quarter of 2001 compared with #1.05bn in the previous quarter – a rise of 4.2%.

This indicates less dramatic but steady growth for the industry in 2001 in spite of economic uncertainty in many sectors.

The findings come as PwC said it had ‘not ruled out’ making similar cutbacks to KPMG, after it recently shed up to 210 of its consulting staff, citing a downturn in IT business as the reason for the move.

Already KPMG has announced up to 10% of its 2,100 staff will go. The news is a further sign that economic problems in the US are beginning to bite deeply in the UK.

A spokesman for the firm said: ‘We are reflecting where we are in our business now. In large sections of business this year there has been a downturn. It has not been unique to us by any means and it has necessitated us looking at our staffing levels.’

Ernst & Young, which last year sold its consulting business to Cap Gemini, also believes that further cuts are imminent.

‘Economic downturns do have an effect on the consultancy industry. In the current economic climate, there is the possibility we will see more of these moves,’ said a spokesman.

However according to the MCA, overall income for management consultancy services has grown broadly in line with GDP and now represents over 50% of MCA firms’ income.

But it agrees with the firms that IT and outsourcing revenues seem to be more susceptible to general economic conditions and the timing of large projects can have a major impact on fee income. MCA members also remained confident about the industry’s prospects, reporting increased volume orders.

It believes e-business will continue to be a major driver for consultancy work, generating 70% of members’ revenues in 2001. It is expected new work will be in the public sector, overseas and in financial services.

Bruce Petter, MCA’s executive director, said: ‘As predicted, industry growth is less dramatic than in 2001 but the survey supports the view that member firms will adapt to changing market conditions with a greater focus on management consultancy activities and e-business related projects.

Most of our member firms have ambitious recruitment plans for this year and the longer term prospects are encouraging.’

Consulting jobs at riskwww.accountancyage.com/Practice/1121833

The MCA’s website is at www.mca.org.uk.