The UK government has once again seen consulting spending spike to record levels, with Tussell research showing the financial year 2024/25 led to a bill of £3.7 billion. The legacy of outsourcing in the wider public sector has also been laid bare, however, with the revelation that the heavily scrutinised consulting bill still only makes up 2% of overall procurement spending.
The UK’s consulting market is estimated at bringing in annual revenues of over £20 billion. It’s second largest client base remains the public sector – with government contracts having driven between one-fifth and one-quarter of consultancies’ incomes in recent years.
With the UK’s civil service having been left in a weakened state by a decade of austerity cuts, the state was faced with a succession of systemic challenges – from the protracted Brexit process, to the Covid-19 pandemic. In this context, successive governments have sought to plug skills-gaps with knowhow from the consulting sector. But with a rising spend on consultants representing an increasingly unpopular transfer of public funds into private hands, a growing chorus of voices has suggested the habit might be preventing the civil service from rebuilding its strength in the long-term.
Source Tussell
At the 2024 general election, this saw both major parties opt for a change of tack – and Keir Starmer’s Labour Party, which went on to win, pledged to reduce government spending on consultants by £3.73 billion over five years. These savings still seem to be hypothetical, however, as research from Tussell suggests that consulting spending is still climbing on Labour’s watch.
For the 2024/25 financial year – the first of the current government – consulting spending rose by 6%. While that is slower than the 20% the year before, it still represents a climb to a record high, of £3.7 billion for the year.
Source Tussell
Management consulting contracts for central government boomed by 79% over five years, from £1.1 billion in 2019/20 to 1.9 billion in the latest figures – growth of some £800 million. Proportional to their starting size, however, they are not even the fastest growing area of expense. the defence sector are the largest driver of this expansion, according to Tussell, having expanded by 196% over the five years – from £70 million to £207 million. At the same time, local government saw a 105% spike, and the NHS matched central government at 76% – though all three segments still have a much lower total spend.
Over that same period, some consulting firms have dominated the landscape for public sector consulting. In particular, Deloitte has been the most popular winner of key contracts for five years straight – racking up fees of more than £400 million in that time. However, some smaller, niche firms are mounting an increased challenge in recent years.
Source Tussell
Multinational engineering and technology services consultancy Alten has broken into the top 10 consultancy suppliers over those years, with accrued fees of 75 million. Similarly, business services consultancy Palladium has taken some £102 million in fees. And assorted specialist firms have meanwhile taken a combined £70 million since the 2019/20 financial year – reflecting at least some variation in who is winning government work.
Most interestingly, though, while the eye-catching rise in consulting fees may generate further debate around whether the public sector would get better value for money rebuilding its own expertise, Tussell found that consulting is actually on the low end of private sector contractors taking public funds. Taking up 2% of procurement spend – as it has consistently since 2019/20 – it is far behind construction and healthcare, both on 18%. And as the NHS increasingly faces calls for greater efficiency, the legacy of private finance initiative (PFI) spending to paper over cracks in the institution might be due more introspection than the government’s advisory bill.
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