BrazilGerman consulting market contracts 'just' 3% in pandemic-hit year
For first time in over decade, Germany’s consulting industry has not grown in the last year. Amid the Covid-19-induced economic downturn, the industry saw revenues drop by 3.2% to €34.6 billion.
Reflecting on the market developments of the last 12 months, Germany’s association for consulting firms – the Bundesverband Deutscher Unternehmensberater (BDU) – stated that for most consultancies, 2020 was better than they feared for. When Covid-19 first spread across Europe, more cataclysmic estimates saw the organisation anticipate a double-digit dip. Meanwhile, one particularly grim survey even forecast a drop of over 25% in fees.
In the end, however, as has been seen in the UK, the consulting industry proved more resilient than expected. Having already been used to working digitally and remotely, transitioning to remote working was relatively smooth for consultants, while there was plenty of demand for firms to help clients facing unprecedented changes.
The most obvious areas to benefit from the downturn were restructuring, supply chain, financial management, technology and e-commerce work, but strategy and innovation were also in high demand, as companies looked to prepare for life in the post-Covid-19 economy.
With the BDU now confirming that Germany’s consulting industry only shrank by 3.2% over the last year, it has proven to be one of the most resilient globally. The country is home to over 4,000 consulting firms with revenues of over €1 million, with 175 of these consultancies generating more than €50 million in fee income. With that being said, the impact of the crisis was not equally distributed across all firms.
According to BDU President Ralf Strehlau, for example, “consulting firms with a focus on human resources consulting or crisis-hit sectors such as the aviation and tourism… suffered substantial losses.” At the opposite side of the spectrum, meanwhile, consultancies specialised in healthcare, pharma, government, digital transformation and restructuring were well positioned to outperform their peers.
At the same time, size clearly mattered when it came to coming through the crisis unscathed. Many of the world’s leading consulting firms were among the German market’s top performers. Globally, Boston Consulting Group and Bain & Company posted their best years ever, while also Simon-Kucher & Partners managed to continue its global growth trajectory. While these firms don’t post financial figures at country level, according to an analysis by German business newspaper Handelsblatt they have booked local growth as well.
Illustrating the strong position these firms are in, BCG is planning 800 new hires in Germany this year, Bain is eyeing 300 new recruits while Simon-Kucher is aiming for an intake of 135 consultants. Meanwhile, Germany’s largest player in the strategy consulting segment McKinsey & Company – which doesn’t release its financial performance at any level – is planning to recruit 900 new employees domestically in 2021.
The outlook
For the current year, the consulting industry is forecast for a strong return to growth of 9% on aggregate. As the economic turmoil of the last year looks set to continue deep into 2021, however, restructuring consultants are the most optimistic, with firms offering that service forecasting 15% growth. This is in anticipation of the wave of company collapses that are expected when the federal government's aid programs for the economy come to an end.
Meanwhile, consultants specialised in process management and optimisation expect a sales bump of 10%. Not surprisingly digital consultants are fare among the most optimistic groups.
From an industry perspective, healthcare consultancy spending is expected to increase by 12.5%, the forecast for the chemicals and pharmaceutical sectors is 11% growth, while retail is set for an increase of 10%. If BDU’s overall outlook materialises, this would mean that Germany’s consulting market would return to the boom phase that it experienced before the coronavirus, enjoying a decade of uninterrupted growth.
Nevertheless, the pandemic will leave an indelible mark on the make-up of the consulting industry. Experts in Germany (and beyond) assume that the forced switch to virtual formats will permanently change the way consultants cooperate with customers and internal workers.
A Handelsblatt survey among German consultants found that the majority of consultants agree that there will never be a 100% return to the old ways of doing things. Instead, the future will be a hybrid way of working – relying on a mixture of in-person and digital delivery.
