MCA predicts 'continued uncertainty'

The consultancy industry faces 'continued uncertainty' in 2005, but UK plc is waking up to the idea of using consultants to drive up revenues, according to a report for the Management Consultancies Association.

Fiona Czerniawska, director of the MCA's think tank and author of the study The UK consulting industry 2004/05, told Accountancy Age that the industry has faced several years of fluctuating fortunes.

But despite 'continued uncertainty' and a fee income fall of 9% in 2004, UK businesses were returning to more 'innovative approaches' with an increase in confidence over buying in 'pure' consultancy work such as strategy, marketing and human resources.

The report said: '2004 was the best year since 2000 in numerical terms but only recovered towards the end of the year. The penny has now dropped within businesses that the last two years have taken their toll on firms. We are seeing an increase in business confidence over hiring management consultants, particularly within traditional sectors such as strategy. This was a market in the doldrums but is now coming back strongly.'

But Czerniawska said pure consultancy fee income had decreased slightly over the last 12 months and that it was still 'not a buoyant market'.

The report showed that IT investment was the principal area of growth having increased by 13% in 2004, while systems development had risen by a staggering 43%. IT consulting and systems development now account for around a quarter of MCA member firms' fee income (£1.7bn).

Czerniawska said work within banking had also grown. 'Compliance such as Sarbanes-Oxley and Basel II has boosted the financial services sector with banking work up by two-thirds. An upturn in IT and regulation has caused this.'

She added that the growth within the public sector would gradually decelerate with operational improvement work around large outsourcing contracts increasing.

The report found that, since the turn of the millennium, growth in income from the MCA-s 60 member firms - around 65% of the UK consulting sector - has almost doubled to £6.5bn. Income from MCA members grew by 10% in 2004, with the UK consulting market now estimated to be worth just over £10.1bn, up 4% on 2003.