Deltek Clarity Study: U.K. Professional Services Firms Believe Technology Holds the Key to Growth

We recently published the results of the 4th Annual EMEA and APAC Clarity Industry Study which focuses on trends and insights for architecture, engineering and consulting firms. There were some interesting insights across several areas, including opportunities and challenges, technology trends, corporate strategies and governance, growth potential and how firms are monitoring key performance indicators (KPIs). What became clear from the results is that firms are now focusing more on growth after a turbulent few years. However, they are facing the challenge of knowing where to set their focus in 2023 to meet their business goals.

Below we’ve drilled into some of the insights and trends identified by architecture and engineering (A&E) and consulting firms in the U.K. as they entered 2023.

Growth is a Focus but U.K. Firms Are Struggling with Strategy

Overall firms have a renewed focus on growth in 2023 but, 53% of senior decision-makers indicated that they don’t have a ‘clear and agreed strategy to ensure stable growth.’

Possibly off the back of this, firms in the U.K. are more pessimistic about profitability than other areas of the world with only 65% of firm leaders expecting profits to increase this year. In the Nordic countries and Australia & New Zealand, the outlook is more positive at 79% and 77% of firms respectively expecting their profits to increase.

If we look at what might be driving this lower confidence, we can see that there are specific concerns and challenges that firms in the U.K. are focusing on. Compared to 16% in the Nordics, 20% in Germany and 20% in Benelux, 31% of firms in the U.K. expressed concern about increases in supply chain/material costs.

The adoption of artificial intelligence (AI) was also flagged as a challenge by more than half (53%) of the U.K. A&E and consulting firms surveyed. As a comparison, this drops to 39% for firms in Benelux.

U.K. Firms Have Renewed Focus on Digital Transformation

U.K. firms have renewed their focus on digital transformation and are ahead of the curve compared to other regions. They are more likely to see themselves as being at a mature or advanced stage of the digital transformation journey, meaning there is clear alignment between their business strategy and IT initiatives, creating a culture of innovation. To put this into perspective, only 19% of firms in Benelux believe that they are mature or advanced in their digital transformation, this increases significantly to 35% for U.K. firms.

For those firms not yet digitally mature, 69% are confident that they will catch up over the next five years. To compare, in Germany, only 56% of firms are this confident.

Concerns about losing market share and cybersecurity attacks/threats may be driving this renewed focus.

On average, U.K. organizations feel it would take just under two years (1.8 years) to begin to lose market share if they failed to make significant progress in digital transformation. And 36% of U.K. businesses felt they would lose share within a year. This is more pessimistic than firms in the Nordics, where only 17% reported the same.

Across industries, engineering firms were the most concerned, with almost two-thirds (64%) concerned that they would lose market share within a year, compared to 21% of architecture firms and 28% of consulting firms.

As mentioned, cybersecurity attacks/threats are a concern with U.K. firms ranking it as the number one concern alongside global/country-based recession. Both were selected by 66% of firms surveyed.

Overall, the results from the Clarity Industry Study show that the future continues to look bright for U.K. firm’s digital transformation plans with most (93%) feeling well prepared to implement their plans, with more architecture firms indicating they feel prepared than engineering or consulting firms.

Digital Transformation Maturity: 4th Annual EMEA and APAC Deltek Clarity Report

Technology Investment Seen as Key to Growth

This renewed focus on growth and digital transformation has led many firms to re-evaluate how they invest in technology. In fact, like all other regions, the biggest growth opportunity in the U.K. is perceived as investing more in IT infrastructure (25%).

The focus on technology investment doesn’t stop with firms’ existing infrastructure as 76% of firms plan to invest more in emerging tech this year than they did in 2022. And almost 30% of these firms have stated that they plan to invest “significantly more” than they have in previous years.

So what technology are firms focusing their investment pounds on? Two-fifths of leaders have identified the following technologies as being very important to the success of their organization: Big Data (45%), Data Science (43%), Artificial Intelligence (41%), and Robotic Process Automation (41%).

Firms may be ambitious when it comes to their digital transformation and technology adoption plans, but this won’t come without challenges. The firms surveyed identified their top three challenges relating to adopting emerging technologies as, a lack of client education (51%), the cost of technology (51%) and a lack of employee education (49%).

Emerging Technologies and Their Importance to Firms: 4th Annual EMEA and APAC Deltek Clarity Report

Attracting Talent is Still a Challenge for U.K. Firms

The discussion about attracting and retaining talent has been especially important for A&E and consulting firms over the past few years. And the results from the Clarity Industry Study show that it’s still a challenging area for firms.

Almost two-thirds (63%) of those surveyed in the U.K. say their organization is planning to increase the size of its workforce during 2023, with 16% saying they expect it to significantly increase. However, 34% of firms admitted difficulty in attracting and retaining talent, with 32% saying that a lack of work/life balance is detrimentally affecting their firm’s attractiveness as an employer.

Firms have also confirmed that they are investing more in employee wellbeing as a way of attracting talent to the business. A high percentage (73%) of firms in the U.K. place more importance on employees’ mental health and wellbeing in 2023 than they did at the start of the previous year. And 35% feel that it’s significantly more important now than at the start of 2022.

And U.K. firms aren’t just talking about it, they are taking action with 46% of firms confirming that they have a clear and agreed strategy in place. If you compare this to Germany at only 25%, U.K. firms are ahead of the curve. In addition, U.K. organizations (78%) are also more likely than those in Germany (61%), to have initiatives currently in place for DE&I (Diversity, Equity & Inclusion).

More widely, firms are also focusing on Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) issues which could make them more of a draw for top talent. 72% of U.K. organizations have confirmed that they are placing more importance on CSR/ESG issues now than they did at the start of 2022, with 27% that feel it’s significantly more important.

Part of this focus could also be due to the potential impact CSR/ESG have on a company’s ability to do business. For example, 54% of firms say that they are only planning to do business with socially responsible companies and the same number confirmed that their clients only do business with socially responsible suppliers.

Mixed Results in Tracking Project and Business Success

The Clarity Industry Study revealed how firms are tracking success at the business and project levels. When it comes to tracking and reporting on project management metrics, there were mixed results with more than half (54%) of U.K. firms lacking confidence in their ability to accurately report on project schedules. And 55% felt the same when it comes to tracking actual costs.

This could be because 86% of organizations surveyed from the U.K. still use manual data entry for their projects’ financial data. And a third (35%) are completely reliant on manual data entry and spreadsheets.

However, firms are still committed to tracking KPIs such as profitability (77%), client satisfaction (74%) and average billing rate (73%), but may not be as confident in what the data is showing them. Some metrics are not tracked by as many firms and may be opportunities to give better visibility to project risks including earned value management, estimate at complete, or multipliers with only slightly more than 60% tracking each of these critical metrics.

Percentage of Firms that Track Each KPI: 4th Annual EMEA and APAC Deltek Clarity Report

What Next for Architecture, Engineering and Consulting Firms?

While it’s safe to say that the firms surveyed for the 4th Annual Deltek EMEA and APAC Clarity Study are more confident about the future, they still have a few challenges to face as they work to meet their objectives. Firms need to work on the strategy behind their growth ambitions, how they will attract the talent they need to support this growth, and ensure that they have the right tools and technology to deliver positive project outcomes for their clients.

We’ve only scratched the surface of what’s available in this year’s Deltek Clarity EMEA and APAC Industry report for architecture, engineering and consulting firms. Download the full report to gain even more insight into the state of the industry for firms in 2023 and beyond.