The business services industry has recorded global growth, primarily driven by expansion and profitability in logistics and distribution, legal and professional services and digital and education services.
This is according to PwC’s Global Business Services Index (GBSI), which measures and tracks the performance of 247 leading international companies across eight key service sectors, analysing four dimensions: growth, profitability, productivity and cashflow.
The eight service sectors contained within the index are logistics and distribution; business process outsourcing (BPO); testing, inspection and certification (TICC); human capital management (HCM); digital and education (D&E); built environment services (BES) as well as legal and professional services.
Compared against the base year of 2019 (Index 100), the eight sectors have shown strong performance as a whole, reaching 115 as an aggregated index for the business services industry. The strongest performing sectors were logistics and distribution (sector index score 124), BPO (119), digital and education (118), and professional services (118).
Sector performance and drivers for growth
As the top-performing sector, logistics and distribution showed industry-leading improvements across growth (dimension score 157), profitability (121) and cash flow (120), partly due to supply chain disruption driving demand during the pandemic. Within profitability, most businesses saw growth in margins by passing on higher costs to customers and leveraging excess capacity, but investments in tech solutions and process innovation are enabling them to stay profitable and productive in the long-term.
Business process outsourcing continued to display resilient growth, with customers continuing to use managed services to optimise costs and leverage expertise. At 152, growth was the dimension contributing to the strongest improvements for the sector, above the business services industry average of 142, driven by geographic expansion and acquisitions. BPO also showed the strongest productivity improvements at 105, which continues to prove the hardest industry performance dimension to get right.
Digitalisation of training content and ever-growing demand for data and intelligence has benefitted the digital and education sector, which ranked as the joint-third highest performing sector on the index at 118. Its greatest improvements were with growth (150) and profitability (117) dimensions, mainly due to an increase in online education and growing needs for career-focused upskilling, and margin improvements linked to the scaling up of digital content.
Also joint-third was professional services, which saw strong growth (dimension score 149) and improved profitability (114) due to more diversification into high-margin and high-growth segments such as energy, analytics, generative AI and cloud technology, to offer cost optimisation solutions. Rising demand for specialised offerings has prompted consultants, auditors and risk firms to provide more niche services to clients at higher margins. Both Legal and Professional Services are investing in AI, data infrastructure and new services and to enhance capabilities, which are yet to fully demonstrate productivity benefits.
The testing, inspection and certification sector has experienced strong and cash generative growth over the last four years, making it attractive to outside investors and driving M&A activity. With an overall sector index score of 116, the main improvements were witnessed in growth (dimension score 138) and strong cash flow (116), mainly due to innovation in diagnostics, ESG and other new segments.
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