Labour’s consultant cuts spark call for smaller firms, says Gov.uk founder

Labour has announced a plan to cut government spending on external advisers by more than half, targeting savings of over £1.2bn. The Treasury’s new rule aims to curb the use of large, often multinational, consulting houses that have traditionally dominated Whitehall contracts.

Why the push for smaller consultancies matters

According to data from Tussell, total spend on management‑consultancy contracts actually rose to £1.44bn in the first year of the current administration, up from £1.28bn the previous year. Critics argue that the civil service shed essential skills when it outsourced work, leaving a gap that only a narrow set of firms can fill.

Public Digital’s angle on the market

Ben Terrett, chief executive and co‑founder of Public Digital, acknowledges the need to rein in “Big Four‑style” contracts but urges ministers to diversify. “We need to look beyond the usual suspects in London and give smaller, regionally‑based consultancies a chance to compete,” he told City AM.

“If you go and renew your passport and then you try to buy a new mobile phone package online, you might think that the government is better at technology.”

Terrett, a former civil servant who helped launch Gov.uk, says his firm’s edge lies in “lived experience”, hiring people who have worked inside government and understand its constraints. Public Digital has built a portfolio that includes the IRS, UN bodies and the World Bank, and is now expanding into the private sector, where it accounts for roughly a quarter of its turnover.

One recent success involved a partnership with telecoms giant BT, where Public Digital identified inefficiencies and delivered a 23% reduction in technology spend. The firm is also eyeing the water industry, a sector that, while privately owned, operates under heavy regulation. “We can take existing money, use it better and improve efficiency without any new funding,” Terrett said, noting that Andy Burnham recently paused a public‑administration plan for Thames Water due to cost concerns.

Looking ahead

While the consulting market remains crowded, heavyweights such as McKinsey and the Big Four still command a large share of contracts. Public Digital hopes to grow at about 30% a year, targeting a £50m turnover and a staff headcount of 200 by 2030. If Labour’s spending limits take hold, smaller firms could see a surge in demand, especially if they can demonstrate the kind of cost‑saving case studies Terrett cites.

For policymakers, the challenge will be to balance the drive for lower prices with the need for specialised expertise. As the Treasury tightens its purse strings, the success of firms like Public Digital may shape the next generation of public‑sector procurement.