GCC consulting is no longer ‘standing out’ on the world stage
While in many parts of the world a six percent growth in consulting would be a cause for celebration, a new report reveals today that it’s a real concern for consulting firms in the GCC.
Now a market worth almost $3billion ($2.84billion), growth has slowed in the last two years from 15 percent in 2014.
The report from the leading research and strategy firm for the global management consulting industry, Source Global Research, finds that the market wide slowdown was even more dramatic across the GCC’s public sector (down from 19.4 percent in 2014 to 5.6 percent in 2016). The public sector market for consultants is now worth $900million, but the recent slump in oil prices has constrained activity for consultants.
To make matters worse, late payment is becoming a real issue for consultants across both private and public sectors. Many firms report that the situation in Saudi Arabia and Qatar has led to the problem becoming markedly worse over the last 12 months—with clients beginning to set their own timeframes for payment.
Against the backdrop of the market slowdown, performance across the GCC was mixed. Saudi Arabia grew 6.5 percent to $1.31billion, the UAE grew 6.6 percent to $815million, and Qatar grew 4.4 percent to $342million.
Edward Haigh, Director of Source Global Research, said: “Six percent growth meant that 2016 was the year in which the GCC - the consulting world’s star performer for so many years - stopped standing out. And the consensus, among most of the region’s consulting leaders, is that they’re glad it’s behind them. It all adds up to a market for consultants that’s slower than it has ever been, and in which huge risks and challenges remain.”
Digital takes off
Despite the tough economic context, 2016 was the year that digital finally became a reality for clients in the GCC. Many clients viewed digital technologies primarily as a mechanism for achieving greater efficiency and productivity before realising the additional customer experience benefits it could deliver.
Vikas Papriwal, Partner, Head of Markets at KPMG Lower Gulf and Middle East South Asia, added: “I've never seen clients' needs change so rapidly. Technology is at the heart of those needs, but particularly disruptive technology. It's about how you use robotics in manufacturing, or create digital customer experiences that are second to none.”
Dubai – the bright spot in the UAE
The UAE’s performance was full of contrasts. Abu Dhabi’s market was characterised by cautious clients, slow decision making, and a market that had stalled. In stark contrast, Dubai stood out as a market that combined some of the best features of emerging and mature economies. And with Dubai and Abu Dhabi preparing for the introduction of VAT at the beginning of 2018, the report says that while it’s uncertain just how much work will fall to management consultants as opposed to tax advisors, it’s hard to see it not being a driver of demand.
Most active industry sectors
Financial services was an active market, up 7.2 percent to $599million, and it was here that digital was particularly in demand. Consultants in search of the more familiar double-digit growth turned to the active healthcare & pharma industry (up 10.2 percent to $190million). This market benefited from its central role in the government’s transformation agenda.
Waddah Salah, PwC’s Middle East Consulting Leader, added: “There are exciting new opportunities driving consulting work around innovation and digital in the health sector.”
As clients focused on efficiency and productivity, consultants in the technology and operational improvement service lines benefited most. Technology consultants had a further boost from the uptick in digital demand as the majority of digital work in the GCC relates to technology.
Big Four take lion’s share
The report also found that Type A firms (largely Big Four firms) took the lion’s share of the market in 2016 – growing nine percent to $930million. But the cancellation or postponement of projects—created challenges for firms when it came to planning for workload.
Edward Haigh from Source concluded: “You can’t help wondering if there’s a year of extraordinary growth dangling somewhere out there in the future of the GCC consulting market. Combine Saudi Arabia’s National Transformation Programme with a recovering oil price, pressure building in Qatar as 2022 nears, and the Dubai World Expo in 2020, and you start to create a perfect storm of demand for consulting services. Unfortunately for consultants, that year will not be 2017.”
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.