Saudi Arabia is scaling back its reliance on external consultancy firms, marking the end of an era of unchecked spending on advisory services that fueled the country’s ambitious infrastructure projects.
Shifting Market Dynamics
The kingdom’s consulting sector witnessed rapid growth, surging by 38% in 2022 and 25% in 2023. However, industry analysts predict a significant slowdown, with only 13% growth expected in 2025 following a modest 14% increase in 2024.
“The days of unlimited budgets for consulting projects are over,” said Dane Albertelli, senior research analyst at Source Global. As per the sources of the Leaders team, consultancy firms anticipated sustained demand, but the tightening of financial controls has altered the landscape, forcing companies to adapt to a more competitive and cost-conscious environment.
Government Reassessment and Spending Cuts
Saudi Arabia’s decision to curb consultancy expenditures comes amid fluctuating oil prices and a growing need to demonstrate returns on past investments. The government is prioritizing financial discipline, with major entities like the Public Investment Fund (PIF) imposing stricter policies, including a year-long ban on PwC from acquiring new advisory contracts.
A consultant working in the kingdom described the shift as “a direct response to concerns over excessive spending on external advisers,” citing frustrations over the costs associated with major projects like Neom.
The Changing Role of Consultants
Saudi Arabia’s mega-projects, including Neom and The Line, previously created a lucrative market for strategy firms such as McKinsey, BCG, and Bain. The kingdom initially relied heavily on consultants to shape its economic transformation agenda. However, with growing concerns about cost efficiency, the government is now seeking specialized expertise rather than large-scale advisory teams.
Industry executives report increasing pressure on consultancy fees. “It’s a race to the bottom on pricing,” said a regional consulting leader, noting that profit margins have shrunk by nearly half compared to previous years.
Future Prospects in a Competitive Market
Despite budget constraints, Saudi Arabia remains a key market for consultancy firms, particularly as the country prepares for high-profile events like the 2029 Asian Winter Games and the 2034 FIFA World Cup.
The consultants believe the shift was inevitable. “The government is now scrutinizing value for money more than ever,” said an executive at a top consultancy. As Saudi Arabia recalibrates its economic strategy, firms will need to adapt to a more cost-conscious and competitive environment.
