10 Distinct Features of the Current European Consulting Market, and Why European Diversity is a Strength
Europe is the second largest economy in the world. So let’s take a look at the unique features that characterize the European Consulting market:
1. Europe has two distinct zones –
Western Europe –
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.
Eastern Europe –
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.
The main focus in Eastern Europe remains on operations improvement and digital transformation.
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2. European diversity is a strength –
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 approximately 3%.
However, the size and dynamics vary significantly by country, and we need to look at the market at a more granular level. UK and Ireland are the largest markets in Europe, followed by German-Speaking Countries (or DACH) and France.
3. Eastern European consulting industry grew 7% in 2017 –
The Eastern Europe consulting market has seen a steady year of growth in 2017, 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 2018, was worth $1.6B.
4. Political pressure –
Eastern Europe’s shaky environment have not tampered the steady growth of 5% since 2012.
Eastern Europe’s consulting market saw stronger growth in 2017, with the highest level of expansion in five years hitting 6.7%, and taking the market to $1.6B according to the latest data from Consultancy.org.
5. Biggest Players –
Poland is by far the region’s largest market 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.
Estimates by Consultancy.eu indicate that Polish consulting likely represents 40% of the Eastern European management consulting market, well ahead of its nearest competitor Romania, who holds 17% share.
According to Consultancy.uk, in Western Europe, the top Consulting markets are the DACH region (Germany, Austria, and Switzerland) with a combined turnover of $24B, followed by the UK & Ireland with $23B.
6. Corruption affects the Eastern European market as well –
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.
7. Public and Private sectors sizes –
The private sector continues to be the core source of consulting work in the region. The financial services sector remains 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.
8. Main Revenue Sources –
In terms of 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.
9. Major Industries – Eastern Europe –
The main sectors that drive the region’s growth are:
- Technology – Consultants help Clients maintain or update technology in their supply chains, particularly in the automotive industry – but growth in this sector is also driven by aviation, with Eastern Europe representing the continent’s fastest-growing aviation industry. There was also strong growth in technology, media, and telecom.
- Digital Transformation – As clients looked to automate tasks to reduce cost and drive efficiency, the digital transformation consulting line has become a $44 billion global market, and Eastern Europe is set to continue growing in that sector in the next few years.
- Risk and Regulatory – represent the 2nd fastest growing service line, with clients seeking consulting support to deal with an increasingly heavy regulatory burden in line with the rest of the world, particularly thanks to the landmark GDPR roll-out of the past year. Eastern Europe is also a popular destination for consultants involved in helping remote clients set up locally, providing strategy, real estate, and relocation services.
Robotic Process Automation – also a growing sector. The region looks to maintain a competitive edge as a primary destination for nearshoring activity and shared service centers.
10. Major Industries – Western Europe –
Several industries are leading the way in this region:
- Financial Services is the largest Consulting segment in most Western Countries. The industry adapts to new regulation and revisits its channels to market while leveraging digital to optimize its costs. The insurance sector is also active with the ongoing consolidation and the impact of Insurtech.
- Aeronautics, Defense, Pharma, and Retail are also growing fast. The local players seek cost-cutting strategies and operational efficiencies to compensate for the economic growth and the competitive pressure from emerging countries.
- The Public sector is unevenly using consulting across Europe. Nordic countries and the UK are quite heavy users. Other countries like France are mostly using consultants on the IT side for government modernization. The same situation appears in HR-related services. While UK and Ireland culturally closer to the US have a dynamic HR market, Latin countries tend to see this area as a lower priority.
Digital Transformation – Digital initiatives are flourishing with the support of either Strategy-focused or IT-native consultancies. Large corporations are also setting up digital offices to spur a digital culture from within. Over the next few years Data Analytics, IoT, Artificial Intelligence and digitally enhanced customer experience should ride the consulting wave in both Western and Eastern Europe.
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