UK firms axe PR and consulting spend as AI tools muscle in

British companies are cutting back on spending for public relations and consultancy services as they increasingly rely on AI tools, according to City AM's latest Business Spend Pulse. In September, just 4.2 percent of UK firms allocated funds to management consultants and PR services, a significant decline despite a 3.1 percent year-on-year increase in overall spending.

The data comes from Capital on Tap, a fintech firm that provides business credit cards and spend management tools for SMEs, and is based on millions of transactions across 300,000 British businesses.

The consulting sector also reduced its spending by nearly 4 percent in September, the steepest decline of any sector, indicating financial pressures as firms grapple with dwindling customer numbers. Conversely, other industries saw increases, including food retailers (up 9.3 percent), property developers (up 7.9 percent) and leisure goods and services (up 4.2 percent).

AI services attracted more than one in seven firms in September, up from just eight percent a year ago. Anthropic emerged as the leading beneficiary, accounting for roughly half of all spending on AI firms, while OpenAI's ChatGPT dropped to 36 percent share. "Established businesses are spending about 3 percent more than a year ago, with discretionary spending rising faster than essential costs and most sectors up on the year, a sign small firms are investing for growth rather than simply covering the basics," stated Capital on Tap CEO Damian Brychcy.

AI adoption is the most notable trend, with each AI-using business now spending roughly double the amount it did a year ago. London remains the premier city for AI-enabled businesses, with more than one in five firms allocating funds to AI firms – though Edinburgh and Milton Keynes followed closely behind, with 17.1 percent and 17.2 percent using AI respectively.

Since SpaceX's trillion-dollar U.S. IPO in June, UK businesses are also turning to the company, with the share of spend on Starlink and other satellite services up by nearly 50 percent in a year.