The growing influence of private equity firms on public services in the UK has sparked alarm among politicians and economists. Recent analysis reveals that £1 in every £11 spent by the government on contractors now goes to companies controlled by private equity, raising critical questions about financial stability and the prioritisation of profit over public welfare.
The Financial Landscape
In the year leading up to April 2025, nearly £24.4 billion of taxpayers’ money was allocated to private equity-run firms, constituting approximately 8.8% of all government contracts. This staggering figure highlights the extent to which private equity has embedded itself across vital sectors such as healthcare, transport, and waste management.
Research conducted by the Guardian, drawing on procurement data from Tussell and market insights from PitchBook, has illuminated the scale of private equity’s involvement in public services. Local councils alone awarded contracts worth around £9.8 billion to these firms, representing about 10% of their external spending. Notably, a significant portion of this figure—over half a billion pounds—went to CVC Capital Partners, which oversees an infrastructure group managing essential services spanning water, energy, transport, and telecommunications.
The Impact on Essential Services
The healthcare sector has not been spared; private equity-backed companies received upwards of £5 billion in NHS contracts, making up 10.7% of the health service’s external expenditure. Among the largest beneficiaries were a software firm jointly owned by Hg Capital and TA Associates, which garnered nearly £1 billion, alongside a pharmaceutical services provider linked to Vitruvian Partners, receiving close to £500 million.
The implications of this financial landscape are profound. Critics argue that the profit-driven motives of private equity firms lead to “financial fragility and sharp cost-cutting”, potentially jeopardising the quality of essential services. The term “financial pandemic” has emerged to describe the unchecked expansion of private equity, suggesting a systemic risk that the government has yet to fully acknowledge.
Voices of Concern
Natalie Bennett, former leader of the Green Party, has been vocal about the dangers posed by private equity’s encroachment into public services. She contends that the prioritisation of profit undermines the provision of vital services, particularly in the care sector. “If you are running something for profit, you’re often not running it for the benefit of the people who need the service,” Bennett stated, emphasising the ideological shift that has led to this situation.
Ludovic Phalippou, a professor at Oxford’s Saïd Business School, echoed these sentiments, emphasising that the real issue lies not solely with private equity itself but with the excessive debt levels that often accompany these investments. “The core risk is for-profit provision combined with high leverage in sectors where the state has limited alternatives,” he explained.
Moreover, Sarah Longlands, chief executive of the Centre for Local Economies, highlighted the inherent conflicts of interest that arise when profit maximisation becomes the driving force behind public service delivery. She called for greater scrutiny over the awarding of contracts, suggesting that local authorities must reconsider their reliance on private equity to provide essential services.
The Broader Implications
The analysis also revealed significant private equity involvement in the transport sector, with Arriva—responsible for numerous train and bus services—acquired by US firm I Squared Capital in 2024. Likewise, the Department for Education allocated nearly £600 million (11%) of its external spending to private equity-controlled companies, including BPP Education Group and Portakabin.
In response to these findings, UK Private Capital, the industry body for private equity and venture capital, defended the sector’s role in boosting productivity and driving economic growth. They claimed that private equity supports approximately 13,000 UK businesses, predominantly small and medium-sized enterprises, and contributes about 9% to the private sector’s GDP.
Why it Matters
The increasing entrenchment of private equity in public services raises significant concerns about the sustainability and quality of essential services upon which the most vulnerable populations depend. With many private equity firms prioritising profit margins over service quality, the potential for systemic failures looms large. This situation demands urgent attention from policymakers to ensure that public welfare is not sacrificed at the altar of profit, and that public services remain robust and accountable to those they serve.
