UK firms slash consulting spend amid rising AI adoption
British businesses are paring back their spending on consulting firms as they turn to AI for problem-solving, according to Morning Wire’s new Business Spend Pulse.
Median spending on consulting fees fell by 1.9 per cent in August compared to last year, the tracker found, despite an overall 2.2 per cent increase in corporate spending. That compares to a near-doubling in the number of businesses adopting AI, with one in seven firms now spending money on AI companies like Anthropic and ElevenLabs, compared to one in thirteen last year.
Overall, spending on professional services fell by around a tenth as a share of total spend, while the number of businesses paying professional services firms slid by around one percentage point to 18.6 per cent, the steepest drop in any category, laying bare the challenge facing City consulting firms.
The tracker uses data shared exclusively with Morning Wire by Capital on Tap, a fintech providing business credit cards and spend management tools for SMEs. It is based on millions of Capital on Tap card transactions across more than 300,000 British businesses.
The tracker also found a jump in business spend on equipment, tools and hardware as a share of overall spending, as well as a 20 per cent surge in spending on EV charging as more and more businesses electrify their fleet to swerve rising prices at the pumps.
“August is typically one of the quieter months of the year, with many owners taking a summer break, yet businesses still spent a little more than they did a year ago, and they are putting that money into the tools that make them more productive,” said Capital on Tap chief executive Damian Brychcy.
“With the autumn Budget approaching, many will be weighing what it means for their costs. The way they are investing in technology, even in an uncertain climate, says a great deal about their determination to grow.”
London tops leaderboard for AI adoption
London took the crown for the greatest level of AI adoption, the data found, with around one in five firms spending money on the services of top AI businesses. That was followed by Milton Keynes on 16.3 per cent, Edinburgh on 16.1 per cent and Bristol on 15.7 per cent.
The data comes as a growing number of London consulting firms lay off staff as they battle a slump in demand. In July, Big Four giant KPMG drew up plans to slash around a tenth of its UK group corporate services division, while one smaller consultancy, Savannah, was plunged into insolvency after suffering “financial pressure”.