- US consulting market grows 8.1 per cent to $63.2bn in 2017
- Federal spending on consultants rises four times faster under Trump administration
- Consulting arms of accounting firms—mainly Big Four—were well placed to benefit from tax changes
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The 2017 tax overhaul, the first big win of the Trump policy agenda, helped boost revenues for US consulting firms as the market grew faster than the previous year—up 8.1 per cent to $63.2bn[1] in 2017.
Tax changes freed up cash that clients were eager to divert to other priorities, creating work for consultants. The tax overhaul may have been especially good news for the consulting arms of accounting firms, which outpaced the overall market and increased revenues by 9.4 per cent[2] to $23.6bn.
These figures are published today (6th June 2018) in a new report from the leading research and strategy firm for the global management consulting industry,
Source Global Research. The Source report reveals that clients were also looking for help to restructure their tax strategy to take advantage of the new rules. Many of those clients found the Big Four to be a good fit, because they can leverage their tax strategy bona fides to help clients capitalize on the new rules.
Tom Puthiyamadam, U.S. Consulting Competencies Leader & PwC Digital Services Leader, who was interviewed for the Source report, said: “We’ve been talking about tax and consulting working together for 10 years, and now it’s really happening. In the last three months of 2017 and at the start of 2018, there hasn’t been a supply chain transformation discussion or a growth discussion that doesn’t involve tax reform. It’s transformational lighter fluid.”
The Source report says that while regulation is still a significant driver of demand for consultants in the US financial services sector, the peak of regulatory activity has passed. This fact, alongside changes to corporate tax rates, which are likely to boost banks’ net income by around $26bn in 2018[3], freed up funds for financial services companies to invest in a long-overdue growth agenda in 2017. This drove considerable demand for consulting support in the sector (up 8.8 per cent to $16.1bn) on wide-ranging and end-to-end transformation initiatives.
Fiona Czerniawska, Director of Source Global Research, said: “The tax overhaul was good news for all consultants in 2017, but that doesn’t mean that this was a market without challenges. With consulting firms of all types and sizes competing for the same projects, firms are having to work harder than ever to differentiate themselves.”
Federal spending on consultants rises four times faster under Trump administration
Consulting to the US public sector has remained a poor relation of the industry for many years, but the Source report revealed that the new Trump administration’s eagerness to cut budgets, and its willingness to use consultants to achieve this, saw the public sector market for consultants rise four times faster in 2017 than a year earlier—up 4.1 per cent to $6.3bn.
There was a particular demand in the public sector for consultants with combined technology and operational improvement expertise. There was also demand of a strategic nature, with the government looking to address the impact of an aging population on existing public services.
Fiona Czerniawska, Director of Source Global Research, added:“Much of the activity that has taken place in the public sector over the past couple of years has focused on achieving efficiency and cost cutting targets by traditional operational improvement methods. While the ultimate aim didn’t change in 2017, the means of getting there shifted towards more of a digital agenda.
Greater clarity around budgets allowed departments to develop business cases for wider use of automation and advanced data & analytics tools, with the most advanced government entities also investigating the use of AI as a means of reducing staff numbers.”
Other key findings from the 2018 Source US Consulting Market report include:
- The TMT market was the fastest growing for consultants–because of a flurry of M&A activity and transformation work–up 12.3 per cent to $5.7bn in 2017.
- Technology was consulting’s biggest and fastest-growing service line in 2017–as clients replaced legacy systems and invested in advanced digital solutions–up 10.6 per cent to $17.3bn in 2017.
- Technology firms saw the strongest growth in 2017–growing revenues 10.8 per cent to $14.2bn in 2017.
- US consultants are very positive about 2018–with expectations that clients will continue to pursue their transformation and growth agendas.
For more information on Source reports contact ella-sian.jolley@sourceglobalresearch.com or telephone +44 (0)20 3478 1204 or visit
www.sourceglobalresearch.com.
