UK consultant numbers shrink as companies cut back on external advice

The number of people employed in Britain’s consulting industry fell last year for the first time since 2020, according to new research, after firms were forced to cut jobs in response to slowing demand.

Headcount in the UK consulting sector fell by 3 per cent to about 50,000 last year, according to a report by the Management Consultancies Association, a trade body that represents the sector, including the Big Four of Deloitte, EY, KPMG and PwC.

It comes after consulting firms moved to cut jobs last year after a boom in demand during and after the pandemic tapered off, with the Big Four each axing hundreds of roles.

Tamzen Isacsson, chief executive of the MCA, said the decline was because consultancies were restructuring their workforces, noting that there was also a drop in the industry’s attrition rate — the percentage of staff leaving each year — from 17 per cent in 2022 to 12 per cent in 2023.

“Following record hiring in the industry in 2022 and a reduction in attrition, coupled with a return to more normal levels of consulting growth, some firms have slowed recruitment while others have made redundancies to adapt,” she said.

The last time the total headcount of the UK consulting industry shrank was in 2020 during the pandemic. The MCA said it did not hold data to show when it last declined before that. The industry group pointed out that the sector’s UK workforce expanded by two-thirds between 2018 and 2023.

The report also found that UK consulting revenues increased by 11 per cent last year to £20.4bn, a marked slowdown on the industry’s 23 per cent growth in 2022 but above the growth rate in the years preceding the pandemic. The MCA pointed to increasing demand from overseas clients, with exports now accounting for more than a quarter of the sector’s revenues.

After a hiring boom since the pandemic to keep pace with pent-up demand for work on digital services and M&A, consulting firms last year started cutting jobs in areas where activity had slowed.

Firms have continued to make staff redundant into 2024 as activity has slowed further, with some also quietly pushing out poorer performers or sending staff abroad to busier regions.

The MCA previously forecast that the industry would grow 9 per cent in 2024, while sector analyst Source estimated the market would struggle this year as businesses spend less on corporate advice.

The MCA’s latest report is based on a survey of its member firms and is conducted by independent market research group Savanta.