GCC’s consulting market shrinks 12.4% in 2020

The GCC consulting market shrunk by 12.4 per cent in 2020, contracting for the first time in its history.

The contraction wiped out roughly $400m in revenues, leaving the market’s current worth at around $2.7bn, a report by Source Global Research has revealed.

The dip was attributed to the Covid-19 pandemic as various clients put consulting projects on hold, especially in industries such as retail, hospitality and aviation. Meanwhile, the pandemic also helped intensify the digital transformation imperative, forcing organisations to step up as working, shopping, and services rapidly moved online.

Various regional events are also auguring hope – the Saudi and UAE government initiatives to make the countries easier to work in, a thawing of relations between a number of GCC states and Qatar, and diplomatic ties between the UAE and Israel all contributed to the consulting market looking much stronger by the end of the year. At the back of regional developments, consulting market growth of approximately 17 per cent is expected across the region in 2021, Source said.

The dominant Saudi market is expected to grow by around 19 per cent next year, and most other markets are expected to recover their losses in 2021.

Edward Haigh, joint managing director at Source Global Research, said: “The GCC’s consulting market arguably relies on two things more than anything else: freedom of movement for consultants and reliably high oil prices. So, in a year when consultants were confined not only to their country of residence but even to their homes, and when oil prices were not so much volatile as downright absurd, you can imagine what that did to the nerves of the average consultant in the region.

“The 12.4 per cent contraction of the GCC consulting market in 2020 was no worse than the contraction in the global consulting market overall. It might have felt more painful to GCC consultants, however, partly because the market has never contracted before and partly because the twin-pronged crisis struck so precisely at the market’s Achilles heel. Now, in early 2021, the prevailing emotion is one of relief: It could have been so much worse.”

Performing Sectors
The sector that stood out in terms of performance in 2020 was healthcare, seeing growth of more than 19 per cent. Much of this growth swirled around responding to the pandemic, though ongoing work to define the structure of the Saudi healthcare system has an impressive momentum of its own.

The GCC consulting market also saw growth in the technology market segment in 2020, as the need to rapidly facilitate the shift to remote working drove strong demand of 5.2 per cent. Cybersecurity services performed particularly well as companies sought to secure remote work, driving growth of 11.4 per cent last year. Source expects the cybersecurity consulting market to grow a further 30 per cent in 2021, taking total revenues to $236m.

The GCC’s financial services sector took a hit in 2020, with consulting revenues falling by $160m as banks and insurers put whatever work they could on hold, including lucrative regulatory work. However, Source expects consultants working in the sector to regain their losses in 2021, however, as banks push forward with digital transformation projects.

2021 Forecasts
As many as 63 per cent of organisations in the GCC say their use of consulting support will increase over the next 18 months, with strong interest in the energy and resources; technology, media and telecoms; and manufacturing sectors.

Country	2020 growth	2020 market size ($m)	Forecasted 2021 growth
Saudi Arabia	-11.0%	1,439	19%
United Arab Emirates	-13.4%	580	15%
Qatar	-14.1%	258	16%
Kuwait	-15.3%	207	16%
Oman	-13.8%	106	15%
Bahrain	-13.2%	95	14%

Significant investment has been poured into economic diversification programmes across the GCC in recent years in order to reduce the region’s dependence on oil revenues. As many as 75 per cent of GCC organisations pointed to new technologies when asked what they would be investing in to promote further economic diversification.

Meanwhile, almost half (44 per cent) of clients expect consultants to cut their fees, with 13 per cent expecting the cuts to be steep. However, 38 per cent of clients predict fee rates will go up in the aftermath of the pandemic, and of those, over a third (39 per cent) say the need for expertise will drive these increases.

 “Given the ongoing pandemic and its deleterious effect on the consulting market last year, one might well expect consulting fees to suffer over the next 18 months. The divide between those expecting fee cuts and those expecting hikes may reflect a split in opinion over whether GCC economies will bounce back in 2021,” noted Haigh.