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Nearly one out of every £11 spent by the UK government on external contractors over the past year went to companies controlled by private equity firms, according to a new analysis that has intensified concerns over the growing role of profit-driven investors in delivering essential public services.
The research found that almost £24.4 billion in government contract spending during the year ending April 2025 was directed to businesses owned or majority-controlled by private equity groups. This represents approximately 8.8% of all public procurement spending, highlighting the industry's expanding influence across healthcare, transport, education, waste management, and infrastructure.
Data compiled from procurement records, corporate filings, and financial databases show that local councils alone awarded nearly £9.8 billion in contracts to private equity-backed companies, accounting for roughly 10% of their outsourced spending. The National Health Service (NHS) also spent more than £5 billion with such firms, representing 10.7% of its external contracts during the same period.
Several major recipients provide software, healthcare services, pharmaceuticals, transport, and infrastructure support for public bodies. The transport sector remains particularly dependent on private equity-owned operators, while schools and universities also rely heavily on contractors backed by investment funds.
The findings have reignited debate over whether essential public services should be managed by companies whose primary goal is generating returns for investors.
Critics argue that private equity ownership often brings high debt levels and aggressive cost-cutting strategies, potentially putting service quality and financial stability at risk. Some economists warn that heavily leveraged companies may struggle during economic downturns, leaving taxpayers exposed if critical services fail.
Natalie Bennett, former leader of the Green Party, described the rapid expansion of private equity across public services as a growing threat. She argued that prioritizing profits over public welfare can undermine the quality of care and support provided to vulnerable communities.
Financial economist Professor Ludovic Phalippou of the University of Oxford said the main concern is not private ownership itself, but the combination of essential public services with companies carrying significant debt burdens. He warned that governments may have limited options if financially stressed providers encounter difficulties.
Sarah Longlands, chief executive of the Centre for Local Economies, said public authorities should pay closer attention to the business models of companies competing for government contracts. She argued that pressure to maximize investor returns can negatively affect workers' wages and reduce service quality.
The private equity industry rejected suggestions that its involvement harms public services. UK Private Capital, the sector's trade body, said private equity-backed businesses contribute significantly to the British economy, support around 13,000 UK companies, and help attract billions of pounds in overseas investment each year.
Industry representatives also pointed to transparency rules governing the country's largest private equity-owned businesses, arguing that the sector drives innovation, productivity, and economic growth.
However, critics continue to highlight previous failures involving private equity-backed businesses in sectors such as adult social care, water utilities, pharmacies, and childcare. They say these cases demonstrate the risks of relying on highly leveraged firms to deliver essential public services.
The latest findings are expected to fuel renewed calls for tighter oversight of government procurement and greater scrutiny of who is entrusted with delivering services funded by taxpayers.
