Accountancy & Management: Stiff upper lip as turnover falls: Times are hard but consultants are not yet downhearted. Roger Trapp reports

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The Independent Online
IF there were prizes for putting on a brave face at a time of adversity, the Management Consultancies Association would surely be a contender.

Yesterday, the organisation that represents the country's leading firms reported that its members recorded their first fall in turnover since the early Seventies in the year to 31 December 1992. Following on from last year's substantial drop in annual growth, one might have expected the 4 per cent drop in fee income, from pounds 843m to pounds 810m, to be causing more than a little anxiety.

But while Paul Thornton, the association's president, acknowledged that 1992 was 'a second successive tough year for the management consulting community', he found reason for optimism.

Growth in overseas markets, particularly eastern Europe, could not offset the 5 per cent fall in UK revenues, to pounds 696m. Even the once highly lucrative field of information technology was hit, earnings falling 12 per cent to pounds 297m as a reflection of the move away from huge projects and the trend towards outsourcing. But it was 'a tribute to the energy and enterprise, and to the newly discovered practice management skills of the association's members, that the decline was not greater', he said.

Furthermore, many members overcame the overall contraction of their markets by finding growth opportunities in 'fashionable yet genuinely worthwhile areas, such as process re-engineering, market testing and benchmarking'. In addition, project management followed last year's doubling of revenues by expanding by 89 per cent.

But, given that one of the association's own study groups has estimated that about pounds 1bn a year is being wasted in the field, it would not be surprising if there were some curtailment of this work - although of course the consultants would maintain that the problem was a lack of direction of the kind that they would supply.

Fees from the public sector also fell, 12 per cent, to pounds 186m, despite an increase in the number of assignments. But the continuing upheaval in the National Health Service was of benefit to the association's members. Having risen by 50 per cent in 1991, the sector saw 90 per cent growth.

Brian O'Rorke, the association's executive director, said: 'Whilst this flexing of muscle in purchasing power, particularly by central government, is to be expected, it is important that the pendulum is not allowed to swing too far, for a serious erosion of margins affects long-term product development and training - the life blood of serious consulting.'

He warned that the growth of the profession would depend on it's being seen to have a valuable role in the development of the economy. 'Today management consultancy is not so much about advice as delivering solutions; consultancy is a major conduit through which new knowledge, new skills and new capabilities are rapidly dispersed to government, industry and commerce. In simple terms, management consultants are catalysts and multipliers in the economy.'