Europe is the second largest economy in the world with two distinct zones.However, the size and dynamics vary significantly by country, and we need to look at the market at a more granular level.
On this week’s Smart consulting Sourcing podcast, Consulting Sourcing Expert Hélène Laffitte explains what are the main features of the European Consulting Market .
Key Takeaway: 2020 has been a particularly difficult year for social stability and security in many regions of the world and the pandemic has amplified social unrest in Europe. If we look at where revenues are growing fastest, retail and manufacturing are providing a glut of work for consultants, as clients continue to respond to the disruption caused by e-commerce and the need to update legacy technology throughout the supply chain. At the same time, digital disruption is pushing a growing number of manufacturers to seek external expertise. Europe is a diverse market and the covid-19 crisis has severely impacted the growth, but 2021 should gradually show an upturn that will benefit the consulting industry.
Hello and welcome to the episode 42 of our podcast: Smart Consulting Sourcing, THE podcast about Consulting Procurement.
My name is Hélène, and I’ll be you host today.
Each week I’ll give you the keys to better use, manage and source consulting services.
This week, I’ll explain what are the main features of the European Consulting Market and why its diversity is a strength
Last week, I gave you a few pointers to solve your make or buy dilemma
We saw that Companies, constrained by limited operations budgets, must carefully prioritize and efficiently organize their projects, which may include external consulting services.Many organizations have craked the make or buy dilemma by centralizing Consulting procurement.
The aim is to have a more global vision of consulting efforts, a better understanding of the costs, and more powerful levers for negotiating volume discounts and creating synergies across functions and business units.
Demand management, Make-or-Buy strategy, and Consulting Spend analysis are parts of the answer to ensure alignment with the overall strategy and consistency across the board.
But today let’s take a look at the unique features that characterize the European market for consulting:
Europe is the second largest economy in the world with two distinct zones:
Western Europe & Eastern Europe
So with the UK, Germany, France, and Italy, the western part of Europe comprises 4 of the top 10 economies in the world. Growth in the region is relatively stable, slightly below 2% despite the Brexit dip for the UK, and the rest of the continent.
Meanwhile, Eastern Europe, even though starting from a lower base with Poland, Bulgaria, and Slovakia, is growing at a higher rate at about 4%. The Western Part of Europe is larger, but Eastern Europe is growing twice as fast.
With the outbreak of Coronavirus last year, the economy of the European Union is expected to shrink by 7.4 percent in 2020, with an economic recovery anticipated in 2021. The Consulting market is always following the ups and downs of the Economy, and we can expect the same growth profile.
I said before that European diversity was a strength. So let’s have a closer look.
The region accounts for robust services and a strong manufacturing sector. Europe has a very active Financial sector, in particular, Banking and Insurance. Also, even though not evenly distributed, the region has access to great natural resources and is home to some of the largest players in Energy. Europe is the 2nd largest Consulting market in the world. It boasts an aggregated value close to $100 billion and is growing at roughly 3%.
However, the size and dynamics vary significantly by country, and we need to look at the market at a more granular level.
The Eastern Europe consulting market has seen a steady year of growth in 2019, with every major country in the region – Poland, Romania, Czech Republic, Hungary, and Slovakia – expanding faster than the year previous. And the market of early 2019, was worth $1.9B.
The main drivers of growth come from regulatory changes at the EU & national level, as well as market entry and operations effectiveness initiatives.
But 2020 has been a particularly difficult year for social stability and security in many regions of the world. The pandemic has amplified social unrest in Europe. We have seen massive public protests in France with the now famous “yellow vests”, but also in Germany.
Besides, the tensions have increased with the Middle East, Turkey in particular, and the UK.
But Eastern Europe’s shaky environment have not tampered the steady growth of 5% between 2012 & 2019. 2020 saw a plunge of roughly 3% but the regional GDP is projected to return to growth in 2021 as activity recovers from the pandemic.
Poland is by far the largest market in Eastern Europe and is emblematic of the trends engulfing the whole region. While the nation has been struggling with a constitutional crisis, Poland’s consulting industry continues to grow.
According to Source Global Research, The Polish consulting market grew 5.4% in 2019, now reaching 555M€ and represents 30% of the Eastern European management consulting market. The second largest market is Russia.
In Western Europe, the top Consulting markets are the DACH region (Germany, Austria, and Switzerland) with combined turnover of 11B€, followed by the UK & Ireland with 8B€.
But the Eastern consulting market is affected by corruption.
Romania might have enjoyed higher growth but there is also political turmoil following the population unrest due to state corruption allegations. According to Transparency International’s annual Corruption Perceptions Index, as of 2017, Romania is the 3rd. most corrupt country in the European Union, after Bulgaria and Hungary.
Other countries that deal with serious corruption issues include Albania, Bosnia, Croatia, Macedonia, Serbia, and Slovenia. These markets combined have around 10% market share.
The private sector continues to be the core source of consulting work in the region, with the financial services remaining the market’s largest one.
The demand is mainly driven by the growing need in front-to-back digitization, regulation, and data & analytics, boosting the need for technology-led efficiency projects, and large-scale transformation, besides regulatory work.
But if we look at where revenues are growing fastest, however, retail and manufacturing are providing a glut of work for consultants, as clients continue to respond to the disruption caused by e-commerce and the need to update legacy technology throughout the supply chain.
At the same time, digital disruption is pushing a growing number of manufacturers to seek external expertise, with manufacturing the second fastest-growing consulting market at 9.7% in Eastern Europe in 2017.
As you can see, Europe is a diverse market. The covid-19 crisis has severely impacted the growth, but 2021 should gradually show an upturn that will benefit the consulting industry.
That’s it for today. Next time, I’ll explain How to Avoid Potential Problems in the Course of a Project
In the meantime, if you have any questions, or want to learn more about what we do at consulting quest, just send me an email at firstname.lastname@example.org
You can also have a look at our website smartconsultingsourcing.com to know more about our book and download free templates & guides to improve your consulting sourcing.
Bye and see you next week! Au revoir!