Wow! Pop those champagne corks. What a year it’s been for the sector’s top 250 consultants.

Despite the industry’s constant complaint of not being able to hire enough good people, between them, as our annual survey shows (page 40), the top 250 consultants employ nearly 20% more staff than they did a year ago and earn 25% more in fees. But is growth necessarily a good thing? And can it be sustained? The answer seems to lie in whether or not that growth is built on solid foundations.

Companies are certainly under a lot of pressure to get bigger. The rise of the megaprojects, framework agreements, bundles of schools, the huge investment needed in IT and training and the growing need to follow clients and offer services overseas all favour firms with muscle power. Hardly surprising then that there has been a marked increase in consolidation: our survey shows 50 acquisitions this year, more than three times the number two years ago.

Two things are striking here. First, being bigger doesn’t appear to have led to a corresponding increase in profitability, with earnings per head of staff actually falling by 9%. Although fees are rising, presumably they’re not keeping up with the increase in salaries being offered to keep good people in place. Either that or we are seeing a marked drop in efficiency, perhaps a result of consultants simply being unable to find enough staff of sufficient calibre.

Second, some consultancies are intoxicated by the urge to get bigger and this is clouding their judgment. Trying to glue together firms with different cultures is not easy, particularly if the figurehead of the acquired group departs soon after the deal is done. The spectacular fall of Erinaceous is an obvious and extreme example. Quite apart from founder Neil Bellis’ questionable vision for this conglomeration of property services, some deals were apparently concluded without the rigorous approach to due diligence essential for such an enterprise, and the sums it paid for companies were well over what Erinaceous’ competitors were prepared to consider. SMC, which has acquired 12 practices since its flotation in 2005, has also had its fair share of financial woes.

This week we have seen more evidence of a waning economy. Thankfully, the government’s spending plans for construction have survived the Comprehensive Spending Review unscathed, and we have had the added boost of a green light for Crossrail and more money for housing. But the chancellor was obliged to downgrade his short-range forecast for growth in the UK in this week’s pre-Budget report. And there were further signs this week that commercial development could be cooling, too. That won’t necessarily mean less consolidation, but it does mean that more than ever it’s essential to approach growth with a sober head and your feet firmly on the ground.

Denise Chevin, editor