Professional services firms facing ‘polycrisis of confidence’
A major study of C-suite attitudes among professional services firms has revealed a complicated landscape of increasing AI use, growth fears, worries about cash flow and concerns over staff motivation.
According to the Managing Partners Forum Winter 2025 Quarterly, shared exclusively with City PM, all firms surveyed have integrated Gen AI into their daily operations, but only 68 per cent believe investing in AI will help the firm grow market share, down from 96 per cent in July.
The report, which is provided to the UK government, mainly focuses on chief executive officers and C-suite members at mid-sized law firms (44 per cent), accountancy (12 per cent) and consultancy firms (10 per cent).
For the senior leaders of these firms, the most important issue is finance and cash flow (64 per cent) and marketing and new business generation (56 per cent).
By contrast, people (staff) and the firm’s role as an employer dropped from 56 per cent to 41 per cent in terms of importance for the leaders, and the issue of employee turnover stood at 14 per cent, down from 23 per cent, but a lot lower compared to over 70 per cent for much of 2022.
However, mid-size companies, dominated by law firms in the survey, are projecting expansion over the next 12 months (89 per cent), compared to only 7 per cent expecting contraction.
Employees ‘demotivated’ by tax take
The report, which is being issued to the government on Wednesday, revealed a “polycrisis” of confidence among mid-sized firm leaders, defined by a heavy tax burden and a perceived lack of strategy for the sector.
Leaders warned that recent dividend and business tax hikes are “reducing the incentive to grow,” forcing some small business owners to quit entirely.
The senior executives also shared concerns that employees are “increasingly demotivated by the sheer scale of tax taken from their pay” adding that “this needs reducing to allow them to afford their domestic costs [and] enjoy the fruits of their hard work.”
Respondents expressed “huge disappointment” with Rachel Reeves’ latest Budget, calling for policies that would “improve our economic outlook”.
The data also showed that working from home has taken hold, with only 5 per cent of employees work full-time in the office and 91 per cent working between a quarter and half the time at home.