UK firms curb consulting spend while AI use surges
A new spend analysis shows consulting fees falling 1.9% year‑on‑year as AI‑related purchases nearly double.
British businesses are pulling back on consulting firms and turning to artificial intelligence for problem‑solving, according to the latest figures from City AM’s Business Spend Pulse. Median consulting fees fell 1.9% in August compared with a year earlier, even as overall corporate spend rose 2.2%.
AI adoption outpaces traditional services
The same data set, compiled from millions of transactions processed by Capital on Tap, shows the share of firms buying AI services jumping from one in thirteen last year to one in seven this year. Companies such as Anthropic and ElevenLabs are now on the procurement lists of a growing slice of the SME sector.
Spending on professional services fell by roughly ten percent of total outlays, and the proportion of businesses hiring consultants slipped to 18.6%, the steepest decline across all categories. By contrast, purchases of equipment, tools and hardware rose, and spending on electric‑vehicle charging points surged 20% as firms electrify fleets to dodge rising fuel costs.
London leads the AI charge
Geographically, London topped the leaderboard, with about one in five firms allocating money to AI providers. Milton Keynes followed at 16.3%, Edinburgh at 16.1% and Bristol at 15.7%.
Consultancies feel the pain
The slowdown is hitting the consulting sector hard. In July, KPMG announced plans to cut roughly ten percent of its UK corporate services division, while smaller outfit Savannah entered insolvency after “financial pressure”.
“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 Damian Brychcy, chief executive of Capital on Tap.
As the autumn Budget looms, firms will be watching how tax and incentive policies affect technology investment decisions. The shift toward AI may also influence upcoming corporate reporting reforms, which aim to reduce administrative burdens and free up capital for innovation.
In the short term, consultants are likely to double down on niche, high‑value advisory work that AI cannot replicate, while many SMEs continue to experiment with generative tools to boost productivity. Over the longer horizon, the balance between external expertise and in‑house AI capability could reshape the UK professional services landscape.
