2026: Teetering between high and low growth

Hurricanes form when an area of low pressure moves through the tropics. Warm air rises creating low pressure further down. This causes more air to rush in, which then rises, cools, and turns into clouds and thunderstorms. As the water condenses it releases more heat to power the storm. In other words, hurricanes feed themselves, each step in their development amplifying the impact of others. A single hurricane, says the US National Ocean Service, can produce the equivalent of the electricity generated by half the world; additional cloud and rain activity can release 400 times that amount of energy. 

Over the last year, the professional services industry was hit by a hurricane formed from three components: 

• Political and macroeconomic unreliability: One of the most important trends of 2025 was the shift in clients’ thinking from seeing the world as uncertain (it may be worrying at the moment but it will right itself in time) to unreliable (the world has fundamentally changed, which requires organisations to adapt). The rollercoaster ride around tariffs put a brake on client spending that lasted from the early spring to the late autumn. 

• New technology: While clients’ views about their own ability to make use of AI flip-flopped between wild enthusiasm and mild pessimism, their expectations around the impact of AI on professional services remained high. More than anything, this was wishful thinking: Concern about the value professional services firms create relative to the money they charge had ratcheted up price pressure in 2024, and AI allowed clients to further tighten the financial thumbscrews. 

• Falling margins: While still trying to unravel the impact of untrammelled recruitment and the salary inflation it triggered in 2021-22, the professional services industry was hit with sclerotic pipelines and cancelled, deferred, or descoped projects, culminating in low utilisation. And there was no sign of the sudden recovery that had rescued the industry in previous crises. 

But what created the hurricane of 2025 was all three components occurring simultaneously. None is a new phenomenon in isolation. The professional services industry has survived economic turmoil frequently, from the Wall Street Crash to the Global Financial Crisis. Like the explosion of AI, the advent of spreadsheets in the 1980s triggered apocalyptic predictions about the coming end of professional services, but in practice created a wealth of new opportunities. Margins have dropped before, but always in response to a specific, short-term, and often self-inflicted, shocks (think of the first pandemic lockdown).  

The problem with all three happening together is that they each fuel one another. Macroeconomic unreliability and AI added to the pressure on margins. Lower margins and the need to spend on technology has meant less investment in the type of new ideas that might have inspired clients to spend more, and so on. 

What will happen to these three mega-trends in 2026? 

There are already some signs that the AI debate is cooling. While the vast majority of clients still think (or hope) it will have an impact on the services delivered, the proportion saying it will have a significant impact has fallen while the timescales for change are longer. No firm should relax—or even cut back their investment—but this does suggest that a bit more time can be taken to think through what clients really want from the use of AI. 2026 will therefore probably be the year in which specific AI-enabled solutions come to the fore (tax services could be a likely focus) which are both more efficient and create more value for clients.  

We think there’ll also be a more considered approach to the impact of AI on jobs, with greater clarity about the extent to which AI-based research, done either by professional services firms or their clients, will replace the bottom layer of the organisational pyramid—which will, ironically, highlight the importance of expertise in the higher layers. Expect to see more investment in both the humans and the machines. One of the factors that could change how firms and clients think about the AI/expertise issue will be proprietary data. Firms with unique datasets will produce more trustworthy and thought-provoking analysis, so we’re likely to see more firms trying to create a competitive advantage by unearthing hidden treasure troves of data. 

We’ve already observed, towards the end of 2025, a slight reduction in the level of price pressure. This reflects both the amount of discounting that went on earlier in the year—to the point where even clients recognised that it was unsustainable—and a growing sense among large client organisations that they could no longer wait out economic volatility in the belief that everything would eventually be okay. Certainly, clients we’ve interviewed in the last couple of months have been clear and uncompromising about the level of change that will be required if they’re going to square off against some serious challenges as well as seize new opportunities. 

We expect price pressure to continue to fall over the course of this year. But we also anticipate an increase in outcomes-based pricing. Clients’ enthusiasm for the latter grew steadily in 2025 but is constrained by concerns around the complexity of such deals. Firms will, fundamentally, need to find ways to better articulate and evidence the economic value they create. The historic failure to do so—clients are almost twice as likely to have a positive view of firms’ expertise than the value they add—didn’t cause last year’s hurricane, but it created the conditions for it.

What of economic unreliability? Once we accept that things won’t necessarily work out for the best and that the worst possible scenario is, in fact, probable, then we’ve effectively lost trust in the future. The upside to this is that we get used to living with unreliability—ironically, we start to rely on unreliability. Our research last year showed that tariffs were a diminishing worry as clients became resigned not just to the existence of trade barriers, but to the speed with which the actual level of tariff could change. If we combine that with the fact that many clients believe that the crisis will last at least three more years, it follows that transformational change is on many organisations’ agenda. Much hangs on the US market, which accounts for more than 40% of the global professional services industry. Past crises have been resolved by rapid economic growth in the US that cascades through the other major markets and beyond. Massive transactions (e.g., Netflix’s planned acquisition of Warner Bros) could also generate huge amounts of work for consulting and other firms.  

Our conclusion? Unhelpfully, it’s that growth rates for demand for consulting and other professional services will be unreliable. 2026 could be another year of tiresomely low growth—or it could see the type of rapid upswing that we saw post COVID. The key message is that firms have to be ready for either scenario. That’s what unreliability is about. 

What can firms do next? 

We’ll be publishing these Leadership Market Updates fortnightly throughout 2026—our expert take on developments in the professional services landscape, alongside nuggets of our latest research. Subscribe to the series to keep informed and understand what these changes mean for your firm.