Deloitte recently announced its intention to reduce its UK workforce by approximately 800 employees, attributing the move to slowing growth and economic uncertainty.
This announcement, however, is just one among several by the Big Four accountancy firms, which include EY, KPMG, and PwC, signaling a deeper underlying issue.
Industry insiders argue that these layoffs are not merely a response to a slowdown in growth but are influenced by a combination of factors. Recruiters and analysts suggest that the root cause lies in the extensive hiring spree that followed the COVID-19 pandemic. Additionally, fewer employees are leaving these consultancies due to rising interest rates and decreased external job opportunities.
These circumstances have led to an overstaffing issue, rather than indicating a prolonged downturn for these firms. James O’Dowd, founder of Patrick Morgan, a recruitment consultancy, succinctly stated, “The dynamic is relatively clear: they’ve overhired.”
Fiona Czerniawska, CEO of Source, a professional services industry advisor, draws parallels with the aftermath of the dotcom boom, where firms needed to downsize to align their workforce with the actual demand, which was still growing, albeit not as rapidly as hiring.
Variation across the market
Although the UK market’s demand has slowed, it varies across practice areas. For instance, merger and acquisition activities have dwindled due to increasing interest rates and economic uncertainty, reducing the need for specialists in company integration. Conversely, the demand for financial services consultants has grown modestly at 13 percent, while energy and digital consulting have seen more robust growth at 35 percent and 31 percent, respectively.
In light of these dynamics, the Big Four are approaching job cuts judiciously. EY is concentrating its cuts solely on its financial services practice, intending to trim 5 percent of its 2,300-strong workforce in that area. The firm also plans to create 1,000 new jobs in Northern Ireland over the next five years.
Deloitte, under the leadership of Richard Houston, has emphasised that its restructuring efforts are targeted, primarily affecting consulting, financial advisory, and risk advisory departments.
Redundancies will be on the rise
However, specialisation in the professional services market has made it challenging to move employees between practices as a traditional response to market fluctuations. KPMG, for instance, is striving to shift consultants between practices and has initiated a targeted redundancy exercise aimed at reducing 2.3 percent of its UK consulting staff (125 employees).
One contributing factor to these staffing challenges is the declining consultant attrition rate, with fewer employees leaving the firms each year. Observers link this decline to limited alternative job options for consultants, resulting in unanticipated growth in staff numbers.
Despite these internal staffing issues, many consulting markets globally continue to experience healthy growth, creating a potential risk of understaffing during an upturn. Ian Elliott, PwC’s Chief People Officer, emphasised the importance of focusing on stable growth and long-term investment rather than reacting too hastily to economic uncertainties. PwC, for now, has no plans for significant job cuts.
As the consulting industry navigates these complex challenges, industry experts caution firms to exercise caution in their workforce reductions, recognising the potential for rapid market recoveries.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
