Confidence levels remain low across all five sectors, but as we also saw in our quarterly survey of client sentiment for Q4, the proportion of executives who say their confidence is depressed by the current economic environment is somewhat smaller than it was earlier this year, at around 70% compared to 82% in Q1. That’s good news for firms, but beneath this headline data, there is some important variation.

Pharma & life sciences and healthcare organisations are the most confident. Pharma executives attribute their relative optimism to having the right information about their markets and operations, while healthcare clients tend to say that their confidence stems from a combination of factors: having a clear sense of direction and the right staff, both of which in turn facilitate faster decision-making.

After the extensive layoffs and restructuring last year, the confidence of TMT executives has recovered somewhat and now sits around the overall market average. A third of executives in this sector also say that having the right information has been key to their improving outlook, significantly ahead of any other factor.

Although the proportion of financial services clients who say their confidence is not reduced is similar to that in the TMT sector, this is more than offset by the high proportion—34%—who describe their confidence levels as significantly reduced. Growing concerns about exposure to defaults caused by higher interest rates is the most important dampener of optimism, cited by 21% of financial services clients.

At a time when energy costs and consequently profits are high, we might have expected to see the energy & resources sector to be more optimistic, but—in line with other research we’ve carried out recently—that’s not the case. E&R clients are most likely to attribute their relative pessimism to consumers economising on use, to international operations that are being complicated by political uncertainty, and to a shortage of key talent to help manage these challenges.

Clients’ views about their confidence levels in Q4, by sector

How is this picture influencing the issues being discussed at senior leadership levels? Across all five sectors, the most discussed issue—cited by 28% of clients—is the need to improve technology infrastructure. This comes as no surprise: Elsewhere, our research has found that around two thirds of clients think that their organisation’s technology needs to be updated as soon as possible if they are to survive in the current market. However, different levels of client confidence in each sector are driving variation in the other issues on the agenda.

In pharma & life sciences, above average confidence levels means that senior executives are likely to be talking about opportunities for growth. Yes, there are still back-office challenge around people and supply chains, but this is a sector where the top of the organisation is starting to look outwards. That's also the case in the financial services sector, although finding new avenues for growth is slightly further down the top team's agenda: Productivity and costs are still concerns, as is risk. For TMT clients, exploiting opportunities for growth looms just outside the very top priorities. Our healthcare respondents come from a mix of public and private organisations, and their common ground is around workforce productivity through automation and the more effective use of technology. For energy & resources executives, currently the least confident of all, the focus of senior leadership conversations is almost entirely internal and operational.

Confidence is key here, but it’s also complicated. Overall low levels of confidence give rise to the assumption that there will, or should, be less money to invest, and that’s likely to hit budgets for consulting and other professional services. Higher confidence can translate into increasing investment in growth—as is the case in the pharma & life sciences sector. In sectors where the picture is more mixed—which is most sectors for now—productivity and greater automation still dominate leadership level conversations. However, as confidence grows, we should expect to see clients’ attention move from productivity to exploring new opportunities for growth.

All of this provides some sense as to how demand for consulting and other professional services is likely to change in the medium term (it takes a while for these conversations to coalesce around specific investment priorities, let alone decisions about whether to use external support). Three points stand out:

1. Consulting firms will be pleased to see that there’s no sign of a diminution of interest in technology, which has been a major source of revenue since the pandemic.
2. This data is a reminder of the continuing importance of being able to help clients to improve their productivity, a point we’ve made elsewhere in these updates.
3. It should tell consulting firms that they need to start building up their propositions and case studies around helping clients grow their business.