The majority of the industry associations surveyed by the German Economic Institute (IW) are pessimistic: 39 of the 49 surveyed associations assess the current situation of their companies as worse than last year; 30 expect to produce less in 2023.
On the other hand, there is no sign of a low in the consulting scene: good advice seems to be in demand even in times of crisis. This is signaled by the Ifo advisor climate, an exclusive special evaluation of the Ifo business climate for the Handelsblatt.
The areas of legal advice, tax advice and auditing are currently doing “very well”, says Ifo expert Klaus Wohlrabe. “More than every second company is currently reporting a good business situation.” Only six percent are dissatisfied.
The consulting industry continues to be “relatively robust” in relation to the general economic situation. The war in Ukraine has not left any traces either. At the beginning of the war there were concerns that business would develop less dynamically. “These have not been confirmed,” explains Wohlrabe.
The mood in the consulting industry is much better than in the economy as a whole
Compared to the economy as a whole, the consultants are “very well positioned,” explains the Ifo economist. The business climate for the industry is almost 40 points higher than for the economy as a whole. “There was no slump in the business climate among consultants, as there was in the economy as a whole,” Wohlrabe continued.
Many crises mean a lot of work for legal and tax advisors as well as auditors. The German Association of Tax Advisors (DStV) refers to the consequences of the corona pandemic, the Ukraine war, the resulting energy crisis and rising inflation.
“As DStV President and tax consultant in my own office, I see the needs of my clients first hand,” reports Torsten Lüth. The profession stands by the many small and medium-sized enterprises (SMEs) affected by the crises “more intensively than ever”.
The head of the tax advisor explains: “The uncertain energy situation is worrying small companies in particular.” Politicians are reacting with ad hoc measures such as the gas and electricity price brake. But it is precisely such ad hoc measures that sometimes show considerable practical weaknesses – and a great need for advice.
For example, the aid mentioned is incomplete in places because the absolutely necessary regulations for the assessment procedure were initially completely missing. “What use are the best-intentioned regulations if they are not implemented in the end?” criticizes Lüth and fears “a reporting frenzy that will haunt us and our clients until at least 2025”.
Lawyers and auditors expect numerous inquiries
The German Lawyers Association (DAV) also sees that the consulting industry has to adapt to questions from a wide variety of legal areas. In particular, the Russian sanctions provided inquiries from various industries, reports DAV General Manager Sylvia Ruge. “The complex question of how previous investments and business relationships can be reversed must also be clarified here,” she reports.
The DAV also refers to the Supply Chain Act that came into force at the beginning of January 2023. This would result in completely new legal regulations for German companies, which would oblige them to comply with human rights and environmental standards along their supply chains.
“Of course, all of this means an increased need for advice – also from a lawyer”, sums up Ruge. The legal profession will therefore also be “busy” in many areas in 2023.
The Institute of Public Auditors in Germany (IDW) states: “The entire economy is directly or indirectly affected by the major supply shocks.” Scarcity of energy and primary products impairs production and the range of services offered by companies and leads to rising prices. The shortage of skilled workers is also having a negative effect.
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IDW board member Melanie Sack confirms: “The auditing companies also feel this.” For example, the clients analyzed alternative production options or new ways of energy supply with external help. “At the same time, they support the depiction of the consequences of the crisis in the reporting of companies and credit institutions,” explains Sack. “In many cases it will be necessary to form higher risk provisions.”
According to the IDW, the business with the classic audit is growing slightly among the auditing companies. This trend should therefore continue in 2023.
Consulting business is growing significantly – the prices are rising
The consulting business is more dynamic: Many companies recorded a clear plus here. The growth is being driven by an expanded range of services, for example in digital transformation projects and support for the increasing reporting requirements in the area of sustainability.
The expectations of the entire industry for the first half of 2023 are high. Around half of the companies surveyed by the Ifo are expecting a further increase in sales; Almost no company expects a drop in sales.
However, part of the increase in sales is fed by price increases. At present, every second consulting firm is reporting corresponding plans – apparently there is still plenty of room for improvement here.
While fewer companies in the economy as a whole have recently wanted to raise prices, there has been no such tendency among consultants so far. “There doesn’t seem to be any concern among the consultants that the price increases could jeopardize the order backlog,” says Ifo economist Wohlrabe. In December 2022, 48 percent of consultants reported a “relatively large” backlog. Only four percent reported “too few” orders.
The very good running business is also reflected in the personnel planning. Numerous consultants are looking for new employees. Almost a third of the consulting firms plan to increase their workforce, and only six percent expect staff cuts.
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