UK election takes aim at public consulting spending

20 June 2024 Consultancy.uk 9 min. read

Early clashes in the UK’s general election campaign trail have centred on taxation plans, NHS waiting lists and the cost of living crisis. But while the Conservatives and Labour Party might disagree marginally on those fronts, both seem agreed on the country’s need to spend less on external expertise in the coming years.

According to some studies, the UK’s consulting market is estimated at bringing in annual revenues of over £20 billion – having enjoyed rapid growth over the past decade, in spite of headwinds which have impacted the wider economy. Partially, this expansion has been powered by public spending – with studies suggesting the portion of revenues the sector derives from the public sector accounts for between one-fifth and one-quarter of consultancies’ incomes.

Following more than a decade of austerity, the UK’s civil service has been left understaffed, even as it has been expected to deal with major changes resulting from 2016’s Brexit vote, and the Covid-19 pandemic. But while the government has defended this as necessary to access the skills necessary for these landmark changes quickly, criticism has been mounting from the public, and doubts have grown that spending on short-term fixes rather than developing the long-term strengths of the civil service is actually delivering value for money.

UK election takes aim at public consulting spending

With government use of consultants having risen to record levels since the last election, fewer and fewer people have been left convinced of that value, especially considering how concentrated the spend has been behind certain firms. Deloitte, EY, KPMG, PwC, McKinsey & Company, Boston Consulting Group, Bain & Company and Accenture have been awarded a collective £7.1 billion in public sector contracts since December 2019, according figures from data group Tussell.

Now, the subject has become a bone of contention in the general election. With the UK headed to the polls on July 4th 2024, both of the country’s largest political parties have pledged to rein in consulting spending, in a bid to court public opinion on the matter.

The UK government has previously made efforts to reduce the use of advisers in Whitehall, including the creation of an in-house consultancy arm during the last parliament. Backed by former Downing Street adviser Dominic Cummings, the “Crown Consultancy” was supposed to cut government spending on private sector firms. However, the project was scrapped last year after officials admitted it “didn’t work” and that departments preferred to use external advisers. High spending since the last election has been a boon to consulting firms, with Deloitte awarded contracts worth £1.9bn during the period, Tussell data showed. Its Big Four rivals KPMG, EY and PwC won £1.3bn, £1.03bn and £1bn, respectively.

With a large lead in the polls, Labour looks to be heading for government this summer – and has estimated it would save £745 million a year by halving spending on consultants, which it said would be reallocated to “prioritising frontline public service delivery and public sector capability”. Over five years, Labour believes this could create £3.73 billion to be reallocated over five years.

The Conservative Party has also committed to halve spending on external advisers, introduce controls on all equality, diversity and inclusion initiatives and spending. However, the party has previously renegued on promises to do so – including the ‘Crown Consultancy’ plan to cut government spending on private sector advisors.

In contrast, though, Rishi Sunak’s party said it has no such plans for ‘reallocation’ of the savings, and instead wants to return the civil service to its pre-pandemic size. Reports from the Financial Times state this could mean cutting nearly 90,000 roles – something which would run the risk of reducing the effectiveness of government services.

Speaking to the Financial Times, a public sector consultant from a global firm commented to that end, “You can be more economic and say you’ll save £3 billion by cutting consultants, but you’ve got to replace them with [civil servants]. You might see that as more efficient but what it isn’t is more effective. You would massively cut productivity, performance and effectiveness.”

Public sector relations

The news comes at a difficult time for the consulting sector, which is contending with flagging growth rates at present. Seeing its second-biggest client-base shift away from spending on advisory services could prove an unwanted hit to many companies’ bottom lines. However, some industry figures still foresee a way in which the future government will have to rely on external experts.

Tamzen Isacsson, chief executive of the Management Consultancies Association, commented, “We stand ready to serve the next government in power and recognise the financial constraints any new administration will face. As MCA members we work in partnership to support government’s ambitions to improve public sector productivity and innovation, enabling them to do more with less, using specialist expertise and world class capabilities. We are proud to deliver outstanding public sector projects and to transfer skills and capabilities to the civil service leaving them better equipped to respond to future challenges."

The MCA has recently been working to build bridges between the UK's political parties and the consulting industry. In particular, it has reached out to the country's two largest parties, which will likely form a government after the upcoming election. While long-standing Tory grandee William Hague will be hosting the MCA's annual awards night later in 2024, the organisation also recently reached out to Labour's Deputy Leader Angela Rayner, to discuss the state of the consulting sector, and how it may be important to solving the UK's most pressing matters.

Isacsson added, "The next government will face a complex series of challenges on an unprecedented scale and we believe it will continue to need the very best of private sector expertise to deliver better frontline services for tax payers. Due to headcount constraints government often lacks capacity or specialist knowledge to deliver projects and as an industry we have stood up resources, as part of the national effort, to improve cyber security, to drive the transition to net zero, and to put in place the Energy Price Guarantee Scheme for all energy customers, particularly supporting vulnerable low income groups."

Isacsson also contended it was "unrealistic to expect government to employ a vast pool of private sector experts and resources", while adding it would be "far more cost efficient to use them for short term projects helping improve the efficiency and delivery of critical national services." Instead, she argued that improving productivity and growth in the future hinged on "harnessing all the very best of skills from the private and public sector to help improve innovation, efficiency and digital transformation."

She concluded, "The UK consulting sector is a great British success story – a thriving force in the economy, driving growth and jobs and recognised across the world as a global centre of excellence – and the next government should promote our sector at home and abroad."