The first point to acknowledge is that our 2024 forecasts for the consulting market, although significantly lower than historic norms, were still optimistic. The slight improvements we saw at the end of 2023 prompted us, at the start of 2024, to forecast positively—and, as it transpires, too positively. 

Over the course of 2024, it became clear that 2023 was tougher for consulting firms that we’d thought. Looking back on 2023 in 2024, we found that the year had actually ended down on what we’d expected, with the recovery signs we observed at the backend of the year proving illusory. Growth in 2023 ended up sitting at just over 3%, when we’d been predicting a rate closer to 5%. Our provisional estimates for 2024 suggest that growth has persisted at a lower level, continuing to hover around the 3% mark, whereas we’d forecast a figure just over 6%.  

By comparison, the wider professional services market fared better in 2023. We think that it continued to so in 2024, pushed up by higher growth rates in technology-related services and in non-discretionary areas around tax, regulation, audit, and legal services. 

This raises two questions.

(1) Why did the consulting market perform less well than expected?

Starting with a geographic perspective, our initial estimates for 2024 suggest that we were right about many of the broad trends. As predicted, the picture in Asia was mixed, with the market in India continuing to be roughly twice the average regional rate (6%, compared to 3%), demand in China effectively flatlining, and growth highest in the smaller, less mature consulting markets. This was mirrored in Africa and Central & South America, where most countries performed above the global average, but regional performance was pulled down by a handful of countries, such as Nigeria and Argentina. At just 2%, growth in Europe was poor but not unexpected: This is a market that has always been relatively slow to recover—and this was at least a slight improvement compared to 2023. The problem has been the US market, which we think grew fractionally under 3%, pulling the global average down (the US accounts for around 40% of the global consulting market).  

Why was this the case? Fundamentally, we think it boils down to confidence. The threat of escalating conflict in the Middle East and its ramifications for global supply chains meant that clients started 2024 in a fairly negative frame of mind, with 96% of US clients and 81% of those in other major consulting markets saying that their confidence had been reduced by world events. However, while confidence levels gradually increased elsewhere, in the US they declined, ending the year with a 15-point difference between US and their counterparts elsewhere, with mixed indicators about the US economy and uncertainty in the wake of the US presidential elections the likely cause. Looking back at previous downturns in the consulting market, the US has recovered quickly—but that’s not the case at the moment. 

There are other reasons, too, why the overall consulting market performed worse than forecast. From a sector perspective, we thought that the energy & resources sector would perform better than it appears to have done—our preliminary estimates peg 2024 growth at around 7%, compared with our forecast of 10%. Similarly, we think that consulting in the pharma sector grew by 5%, still higher than the average but less than the 9% growth we predicted elsewhere. Although lower overall, we were right to say that these sectors would see the strongest growth, but we underestimated the extent to which clients here and elsewhere would put pressure on fee rates and try to do more work themselves that they might have outsourced in the past.  

But our biggest mistake—and this contributed to our overestimation of demand in the US market—concerned financial services. At the start of 2024, we predicted that this sector would grow by around 7%, still below its historic global average, but definitely in the faster-growing part of the consulting market. At the moment, our estimate for 2024 is around 2%.  

Demand in the insurance and investment & wealth management markets has been comparatively strong. The problem has been in banking, which looks to have been flat—and, at $33bn of the $260bn consulting market, that’s had a material impact on overall performance. Why is demand among banking clients relatively weak? Rising regulatory costs have eaten into whatever temporary profit uplift banks have enjoyed as a result of higher interest rates. More investment is needed, but banks are also looking to do more of the work in-house. 

As for specific consulting services, we were right to say that technology (in almost all its guises) would continue to be the key driver of demand for consulting services. At the other end of the spectrum, demand for HR & change consulting shrank again, but we also think that demand for operational improvement fell slightly, due not only to more of the work being done in-house but also to clients starting to hit the wall where further cost-cutting is concerned. The recognition of this pushed up demand for strategy work after a torrid 2023, but less quickly than we’d predicted. 

(2) How confident can we be in our forecast that the growth rate will pick up slightly in 2025?

• Clients are telling us this will be the case: Sixty-four percent of around 1,850 senior buyers of consulting services surveyed over the course of last year said that they expected their use of consulting services to grow in the next 12 months, compared to 58% in 2023. Can we trust clients’ own estimates? Perhaps not in terms of absolute increases in their spend on consultants, but the trend is positive.  

• The underlying drivers of demand for consulting support remain strong: While clients may have less money to invest in external support, they’re short of both internal capacity and capability, which will make it difficult to do much more work themselves. Moreover, they know that, if they’re to keep pace in an intensely competitive environment, they need to increase their investment in technology, with AI continuing to be a major focus of interest.  

• The impact of the Trump administration: Although it’s hard to separate future reality from current bombast, it seems likely that there’ll be some relaxation of regulation that’s likely to simulate growth in the US, the world’s biggest consulting market. Combine that with investment in technology and the easing of barriers to large-scale M&A, the corporate clients in America may well have more money to spend in 2025.  

• It’s going to be harder for clients to drive down consulting fee rates: Last year we calculated that price pressure was at least 10 times higher than its pre-pandemic norm; we also saw a jump in the proportion of consulting firms offering significant discounts. This is unsustainable, so we expect to see more firms pushing back in price negotiations. 

• 2025 is likely to see more polarised patterns of demand: For some time, our analysis has shown that clients whose confidence levels sit somewhere in the middle—neither significantly reduced nor increased—are those with the most muted demand for consulting support because the situation is not bad or positive enough to force them to act. Between Q1 and Q4 2024, this segment of the market shank from 52% to 33%. This has two benefits: First, more clients are in a position where they have to act; second, it’s going to be easier for consulting firms to identify and target those clients with the highest propensity to spend. 

How confident can we be? The lesson of the last two years for the entire professional services sector is that success doesn’t depend on how confident you are, but how well you can keep adapt to a market that is bound to change. 

 

We’ll be tracking the performance of the consulting and broader professional services market throughout 2025. To learn more about our industry-leading market sizing data and gain access to our Market Trends reports, filled with insights to help you identify the growth opportunities for your firm, please get in touch.