An alarming trend has emerged in the United Kingdom, revealing that a significant portion of public spending is funnelling into private equity-controlled companies. Recent analysis indicates that one pound in every eleven spent by the government on contractors is directed towards these firms, raising serious questions about the implications for public services, financial stability, and the wellbeing of vulnerable populations.
The Scale of Private Equity Involvement
According to an exclusive investigation, nearly £24.4 billion of government expenditure on contractors was allocated to private equity-run firms in the year leading up to April 2025, representing approximately 8.8% of all government contracts. This extensive financial engagement has stirred concerns among politicians and economists alike, who highlight the potential for “financial fragility” and aggressive cost-cutting strategies adopted by these profit-driven entities.
Private equity firms operate by acquiring and managing companies to eventually sell them for profit, often leveraging substantial amounts of debt in the process. Critics have termed this rapid infiltration of private equity into both public and private sectors a “financial pandemic,” suggesting that the government has yet to fully comprehend its far-reaching effects.
Public Services at Risk
The investigation, based on procurement data from Tussell, company filings, and other financial information, reveals a striking dependency on private equity within crucial public sectors. Local councils alone contributed nearly £9.8 billion to firms under private equity control, a staggering 10% of their external spending for the year. This includes substantial sums allocated to infrastructure services covering water, energy, transport, and telecommunications, notably involving CVC Capital Partners.
The National Health Service (NHS) is not exempt from this trend, with over £5 billion—10.7% of its external spending—going to private equity-backed companies. Among the largest recipients was a business software firm co-owned by Hg Capital and TA Associates, which received close to £1 billion, while Vitruvian Partners’ pharmaceutical and healthcare services company garnered nearly £500 million.
A Growing Crisis
The ramifications of this private equity dominance are echoed across various sectors, including childcare and adult social care, where the involvement of these firms has been linked to operational failures and service degradation. High-profile collapses of private equity-backed firms have sparked fears of closures and job losses, particularly within the pharmacy sector and social care environments, creating a landscape of “childcare deserts” in the most deprived areas of England.
The transport sector, too, has witnessed significant private equity acquisitions. For instance, Arriva, which operates numerous train and bus services, was purchased by the US-based I Squared Capital in 2024. Furthermore, the Department for Education allocated approximately £600 million—11% of its external budget—to private equity majority-backed companies, including BPP Education Group and Portakabin.
A Call for Accountability
In response to growing criticism, the industry body UK Private Capital has defended the role of private equity in bolstering the British economy. They argue that these firms contribute roughly 9% to the private sector’s GDP, supporting around 13,000 businesses, predominantly small and medium-sized enterprises. However, the collapse of several private equity-backed companies has underscored the vulnerabilities associated with high debt levels and profit maximisation in essential services.
Former Green Party leader Natalie Bennett has described the expanding influence of private equity as a “financial pandemic” that prioritises profit over public welfare. She emphasises that austerity measures and funding cuts have paved the way for this unsettling trend, warning that the most vulnerable in society are bearing the brunt of these changes.
Ludovic Phalippou, a leading academic in financial economics at the University of Oxford, points out that the core issue lies not solely with private equity but with the excessive debt and profit-driven models that threaten the integrity of public services. Sarah Longlands, CEO of the Centre for Local Economies, echoes this sentiment, arguing that the profit-centric approach of private equity firms has detrimental effects on service quality and worker compensation.
Why it Matters
The growing entrenchment of private equity in the UK’s public services raises profound questions about the sustainability and integrity of crucial sectors that serve the public. As these firms continue to exert influence over essential services, the risk of prioritising profit over people becomes increasingly apparent. The government must navigate this complex landscape with greater vigilance, ensuring that the needs of the public are placed at the forefront of any procurement decisions. The implications of failing to do so could be dire for both the economy and society at large.
