Demand remains weak in the consulting industry

The turnaround for the consulting industry is taking longer than expected. Growth during the third quarter averaged only 0.6% (compared to 5.5% last year), and for the first nine months of the year, it was just 0.5%. Companies have maintained good cost control, with half reporting higher operating margins compared to last year, though the average margin slightly declined to 4.4% (4.9%).

This is highlighted in Cinode’s latest summary of Q3 reports from publicly listed consulting firms.

“Most expected a clearer turnaround this fall. Despite gradual improvements, the shift is happening slowly, and the market remains weak this autumn. We anticipate the turnaround will occur by summer instead. However, there are significant differences between sectors. Defense, energy, and cybersecurity continue to experience very high demand,” says Mattias Loxi, co-founder of Cinode, the leading SaaS platform for consulting firms.

CombinedX, Prevas, and Norconsult show the highest growth in the industry, with the first two achieving this through acquisitions.

“Several consulting firms have also reported negative impacts from the new rental law. Some clients, citing the precautionary principle, have interpreted the law as also applying to consulting firms, while other clients and industry organizations have interpreted it differently. The recent EU ruling clarifies that consulting firms are generally not considered staffing agencies and are therefore not subject to the law. With clearer rules in place, we believe this issue will be resolved soon,” Mattias continues.

Softronic, Gofore, and Tietoevry reported the highest operating margins during the quarter. Several layoffs have been carried out during the year.

“Half of the consulting firms have fewer employees at the end of September compared to January 1, despite acquisitions. However, the significant reductions made in the first half of the year now appear to have subsided, and we believe companies will soon start growing their workforce again,” concludes Mattias Loxi.