The Australian consulting market is bracing for a slower growth trajectory this year.

Consultancy clients are tightening their belts due to high inflation and trade tensions, while grappling with the aftermath of the PwC tax leak scandal. 

Research by Source Global Research indicates that the market is expected to grow by 8 per cent in 2023, down from the 10 per cent growth seen in 2022.

In 2022, the Australian consulting market expanded by about 10 per cent to reach a value of US$5.75 billion ($8.7 billion), according to the research firm. 

However, the growth rate was slightly lower than the 10.5 per cent recorded in the previous year, reflecting the impact of ongoing trade tensions and reduced spending.

Public sector consulting, which had experienced steady growth in recent years, is also facing headwinds. 

Source Global Research estimates that growth in this sector slowed to 7.6 per cent in 2022, compared to 8.7 per cent the year before, and is projected to further contract to 7 per cent in 2023.

The PwC tax leak scandal has had far-reaching consequences, leading to a reputation crisis in the consulting industry. 

The federal government severed ties with PwC, resulting in the firm selling its public sector consulting division to Allegro Funds for a mere $1. This loss of federal work has had a significant impact on PwC's operations.

The consulting industry as a whole is witnessing a shift in client demands. With reduced consumer confidence, macroeconomic uncertainty, and a tight labour market, clients are reevaluating their use of consultants. 

Large-scale transformation projects are being replaced by a focus on business-as-usual services. 

Moreover, environmental, social, and governance (ESG) concerns have emerged as a key growth area, as clients increasingly prioritise compliance and emissions reporting.

Despite the challenging economic environment, a survey of consulting clients reveals that only 3 per cent intend to spend less on consulting services in 2023, while 48 per cent plan to increase their usage. 

This indicates a continued demand for consulting expertise, although clients are now more cost-conscious.

The PwC tax leak scandal has also embroiled the Australian Tax Practitioners Board, leading to a clash with Tax Commissioner Chris Jordan. 

Jordan accused the board of overreach and deception, contesting its access to taxpayer information. 

The scandal has triggered multiple investigations, including those by the Australian Federal Police and parliamentary inquiries.

As the consulting industry adapts to changing market conditions and navigates the fallout from the scandal, firms are initiating internal and external reviews to address cultural, governance, and accountability issues. 

These developments are set to shape the industry landscape and redefine the role of consultants in the years to come.