Consultants’ optimism about their prospects is a cause for concern rather than celebration
Our annual survey of the state of play for the UK’s consultants paints a remarkably stable picture, on the face of it (see the Top 200 Consultants tables). Yes, the number of staff employed in the sector has fallen, but by just 2% to over 80,400 - far less than the reduction in construction output that we’ve seen in the past 12 months. At the same time fee income is - very marginally - up. Overall the volume of fee income, while still not at the peak of 2008/09, is actually back to where it was in 2007/08. Some could be forgiven for thinking that all is rosy in the garden.
But, as we know, this isn’t the case. Moreover, the survey finds that ever-optimistic consultants need to be more realistic about the challenges facing them. Because, while many recognise how tough the market is, they still seem to be planning for growth. Unfortunately, the evidence is that, in most cases, this growth is unlikely to come.
Of the more than 200 consultants surveyed - including architects, QSs and engineers - 53% say they will increase the number of staff they employ, while just 2% admit they will reduce in size. In addition a balance of almost a third more think they will increase wages over the next year, rather than decrease them.
Consultants are planning for growth. unfortunately, the evidence is that this growth is unlikely to come
It is important to have positive plans for your business, but this outlook simply will not be matched by reality over the next year. Past evidence shows that, despite the recession, most consultants have predicted expansion every year since 2008.
The reality, according to Hewes & Associates, the firm that collated the survey for us, is that employment in the sector has actually fallen in every one of those years. Worse, every economic prediction is that overall construction output will continue to fall - Hewes says by as much as 5% this year, and by a further 1.3% in the next.
That means that consultancies, gearing up for growth, could find themselves ill-prepared for the challenges they face. Everyone knows that staffing for consultancies is an extremely tricky affair - how to hang on to good people during the lean times, when the next day could see either a big contract that requires an enormous number of people in very short order, or the cancelling of an existing project.
As we see in our news analysis this week, staffing is an issue that contractors at least seem to be grasping with a greater degree of realism. A number have looked forward and understood that 2013 is unlikely to be any better than 2012, and are re-shaping their businesses accordingly. This degree of professionalism in management has not always been evident in the sector and is a positive thing, even though it means some jobs will be lost.
It seems that many consultants which are, by and large, smaller firms, often run by very talented practitioners or entrepreneurs, are still to develop that degree of financial competence. Think of the recent RIBA report that showed that 60% of architects have no business plan. If over-confident businesses expand too quickly and end up in financial difficulty, it could ultimately result in greater long-term damage to the sector.
Joey Gardiner, assistant editor