BrazilSpain’s consulting industry posts fifth year of consecutive growth
With three consecutive years of over 3% GDP growth, the resurgent Spanish economy has helped raise the country’s consulting industry growth rate to over 7%, as revenues surpassed €1.4 billion in 2017. The consulting industry has recovered well since posting declining revenues in 2012 – when the industry was battered by the deep recession and financial crisis caused by Spain’s housing crash.
After declining by a staggering 3% in 2012, the consulting industry in Spain has recovered well, posting 5%+ growth since 2014. The rebounding sector owes part of its recovery to the improving Spanish economy, which emerged from recession in 2014. The Spanish consulting industry’s resurgence has also been driven by firms’ concerted efforts to expand into other Spanish-speaking markets in Latin America – a move which will help firms better insulate themselves from future economic and political turmoil in Spain. As a result, in 2017, the industry grew by a healthy 7.6%, according to data from Source Global Research – which tracks the financials of firms larger than 50 consultants carrying out work over a certain significant dollar value.
2017 saw the industry reach $1.42 billion, capping five years of consecutive growth. The figure is a good deal greater than the $1.16 billion reached in 2011, the last year before the industry was hit by declining fortunes in 2012. The industry has posted consistent growth since then, although economic and political strife threaten to put a dampener on future growth.
Last year, growth in the Spanish consulting market was propelled by the resurgent financial services segment, which posted double-digit growth. The retail consulting segment was the only other segment to top 10% growth. As British financial firms weigh up the perils of an isolated post-Brexit United Kingdom, Spain’s established fintech scene has become increasingly attractive to companies considering relocation.
Traditional bricks-and-mortar retail clients are increasingly investing in omnichannel strategies to defend their businesses against ecommerce competitors. As such, Spanish consulting firms have seen growing demand in their digital transformation lines. For example, Spanish food retailing giant Dia recently hired The Boston Consulting Group to help craft its digital and online strategy. As retail clients attempt to avoid being toppled like so many traditional retailers in the US and UK, the digital transformation units of consulting firms will only continue to grow – being worth an estimated $44 billion globally.
The technology service line remained the largest one in the consulting industry, despite the risk and regulatory segment growing by double digits. With the Spanish economy continuing to grow, budget pressures eased, allowing organisations to digitally revamp their business models and processes – driving up the demand for tech and digital consulting. Robotics and data & analytics services grew in demand, though AI remained at a nascent stage, signaling an area that may see a high level of ‘catch-up’ and growth in the coming years.
“The consulting market in Spain really is going from strength to strength with both consulting firms and their clients now embracing the opportunities presented by new technologies, such as robotics, to change the way they operate,” commented Zoë Stumpf, Head of Consulting Market Trends at Source Global Research.
Obstacles to prosperity
Though the research points to good times ahead for the Spanish consulting industry, a mix of political and economic threats could hinder growth. Geopolitical instability and Euroscepticism seem to be spreading through the EU, bringing with them decreased business confidence and the Damocletian prospect of segmenting the European Economic Area. While Britain continues its somber march to Brexit, polls in Austria, Hungary, and Italy have returned results in favour of populist, Eurosceptic political parties.
The ongoing constitutional crisis surrounding Catalonia’s independence movement has plunged the country into political turmoil – something not particularly good for businesses that crave stability and predictability. Additionally, the ousting of PM Mariano Rajoy this month came on the heels of a high court finding that his party accepted kickbacks for the awarding of government contracts. This most recent crisis follows the gridlocked elections in 2015 and the disputed Catalonian independence referendum last year. The country now faces the prospect of another set of elections unless Socialist Pedro Sanchez can bring together a functioning coalition.
Price pressures continue to exert a downward trend on the Spanish consulting market, as a lack of large clients and intense competition between smaller clients with tighter budgets push prices down for consulting work. As such, growth rates are not expected to be as strong in 2018 as they were last year, with concerns over political turmoil and the dissipation of some previously built-up demand for consulting work moderating growth.
Meanwhile, the youth unemployment rate in Spain is close to 50%, an incredibly troubling figure, and the highest rate outside of Greece. Strategy consultancy McKinsey & Company recently won a Spanish social impact award for its Generation programme which helps unemployed youth find work. The programme trains unemployed youth in technical and professional skills and puts them in contact with relevant businesses. Of the over 700 young people who have participated, 87% were still employed after 12 months.
