Key facts
- British businesses are reducing spending on consulting fees.
- AI adoption has nearly doubled, with one in seven firms now investing in AI.
- Overall spending on professional services decreased as a share of total business expenditure.
- Spending on equipment, tools, hardware, and EV charging has increased.
- London leads in AI adoption, with 20% of firms spending on AI services.
British businesses are significantly reducing their expenditure on consulting services, redirecting funds towards artificial intelligence (AI) solutions for problem-solving. According to City AM's Business Spend Pulse, median spending on consulting fees declined by 1.9% in August compared to the previous year. This decrease occurred despite an overall 2.2% rise in corporate spending.
The shift is underscored by a near doubling in AI adoption rates, with one in seven businesses now investing in AI companies, a substantial increase from one in thirteen last year. Spending on professional services, in general, has fallen by approximately 10% as a share of total business expenditure, and the number of firms engaging professional services firms dropped to 18.6%, marking the steepest decline across all spending categories.
Conversely, businesses are increasing their investment in tangible assets. The tracker noted a jump in spending on equipment, tools, and hardware, alongside a 20% surge in expenditure on electric vehicle (EV) charging infrastructure as more companies electrify their fleets.
Damian Brychcy, Chief Executive of Capital on Tap, commented that August, typically a quieter month, still saw businesses spending more than the previous year, with investments directed towards productivity-enhancing tools. He added that this investment in technology, even amid uncertainty, reflects a strong determination to grow.
London emerged as the leader in AI adoption, with approximately one in five firms in the city spending on AI services. This was followed by Milton Keynes (16.3%), Edinburgh (16.1%), and Bristol (15.7%).
The trend coincides with a growing number of London-based consulting firms implementing layoffs due to a slump in demand. In July, KPMG announced plans to cut about 10% of its UK group corporate services division, and a smaller consultancy, Savannah, faced insolvency due to financial pressures.