Business Spend Pulse: UK firms slash consulting spend amid rising AI adoption

British businesses are reducing their consulting spend as they increasingly rely on AI for problem-solving, according to City AM’s Business Spend Pulse. Median spending on consulting fees dropped by 1.9% in August compared to the previous year, despite an overall 2.2% increase in corporate spending. This contrasts with a nearly doubling in the number of businesses adopting AI, with one in seven firms now spending on AI companies such as Anthropic and ElevenLabs, up from one in thirteen last year.

Corporate spending on professional services fell by roughly a tenth as a share of total spending, with the number of businesses paying professional services firms declining by nearly one percentage point to 18.6%. The data, sourced from Capital on Tap's transactions from over 300,000 British businesses, also reveals a surge in spending on equipment, tools, and hardware, as well as a 20% increase in EV charging expenses as businesses electrify their fleets to avoid rising fuel prices.

City AM chief executive Damian Brychcy noted that businesses still spend more than they did a year ago, investing in productivity-enhancing tools. London leads AI adoption, with around one in five firms spending on top AI businesses, followed by Milton Keynes, Edinburgh, and Bristol. The trend coincides with London consulting firms facing a demand slump, with KPMG planning to cut around a tenth of its UK corporate services division and consultancy Savannah facing insolvency.