Public sector consulting – Behind the headline

Like other people, I have been assuming that public sector expenditure on consulting is counter-cyclical ð it goes up when private sector expenditure goes down.

But the debate over the MCA’s figures prompted me to go back to the facts. At first sight, the details appear damming. Between 1989 and 1997, public sector consulting remained relatively stable ð oscillating around the £200m mark.

There was a slight blip in 1994 when it reached £250m, but this was a point when private sector consulting was starting to grow rapidly. In 1995, perhaps because the booming private sector was soaking up all available capacity and pushed up fee rates, fee income from the public sector returned to historic levels. So far so good.

However, public sector consulting suddenly shot up again in 1998. Apart from a brief fall in 2000 it’s risen ever since.

First, while the private sector growth rate was lower, it was on a much larger base. Private sector fee income grew by almost £800m in 1997-98, and by almost £900m in 1999-2000.

So while the public sector?s £500m hike last year wasn’t peanuts, it wasn’t unprecedented.

Second, between 1989 and 1994, the public sector accounted for roughly a third of the market. Even in 2003, it generated only a fifth of all fees, still well below its historic levels. Indeed, the British Computer Society and Royal Academy of Engineering estimate that IT spending in the UK will reach £23bn this year, of which almost half will be in the public sector.

The root of the issue is not that public sector spending on consultants is spiralling out of control, but that the entire UK economy is using consultants more than ever before. The public sector isn’t out of line: if anything, it’s getting back into line.

Fiona Czerniawska is MD of Arkimeda

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