UK Government’s Tumultuous Relationship with Consultancy Firms
For years, the government has regularly reached out to top consulting firms such as McKinsey, Accenture, EY, and PwC whenever external expertise was needed. However, with new cost-cutting measures under the current administration, the widespread use of these services is now under close scrutiny.
Before Labour assumed power, it committed to reducing consultancy spending by half for the 2025‑26 fiscal year, aiming to save more than £1.2 billion by requiring departments to justify the need for outside help. This shift stands in stark contrast to the previous Conservative era, during which lavish spending on the so‑called “Big Four” firms became the norm, particularly toward the end of its term.
Recent figures indicate that government expenditure on private consultants surged to a level 62 percent above that seen in 2019‑20, with over £3.4 billion spent in 2023‑24. Furthermore, studies have shown that contracts worth approximately £5.4 billion in management consultancy are scheduled to conclude by the end of the current Parliament.
Large projects, such as HS2, saw enormous fees awarded to external consultants—with the principal firms receiving tens of millions each. Meanwhile, the Treasury recently announced it achieved a saving of £550 million in the 2024‑25 period by curtailing non-essential consultancy expenses, and officials expect annual savings to exceed £700 million by 2028‑29.
Why Outsource?
The reliance on external consultancy is largely attributed to a shortage of in‑house expertise and capacity within the civil service. Around 30 percent of those surveyed noted that quicker project turnaround times are necessary, while 25 percent claimed that ministers tend to value independent external advice more highly.
Fiona Czerniawska, CEO of Source Global Research, estimates that roughly 12 percent of the UK’s consulting market is driven by public sector demand.
Impact on Smaller Firms
Czerniawska also warned that while large consultancies with established public sector practices might weather a downturn, mid‑sized and smaller companies, many of which specialize in government work, could face significant challenges if public sector demand falls sharply.
Echoing these concerns, Tamzen Isacsson, chief executive of the Management Consultancies Association, acknowledged the current fiscal constraints while emphasizing a shared commitment with the government to secure value for money and deliver effective public sector outcomes.
Changes in Public Sector Engagement
A recent survey of public sector clients revealed that 80 percent had received specific guidance on how to use external consultancy services since the Labour government took office. Many were directed to lower fees on current projects, limit external support to truly necessary situations, and curtail future spending on such services.
Interestingly, despite these cost‐cutting directives, most public sector organizations anticipate increasing their reliance on consulting services over the next couple of years. Only a small fraction expects to scale back their investment. Czerniawska noted that while there are ongoing efforts to reduce spending, the government continues to outsource to compensate for gaps in specialist skills and staff capacity.
Shortly before the latest round of spending cuts was implemented, one of the Big Four consultancies secured a major government contract valued at £223 million to train civil servants—a clear indication of the enduring role that consultants play in helping the public sector meet its strategic objectives.
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