A groundbreaking report has found that one in every 11 pounds spent by the UK government on public services ends up in the hands of companies owned or backed by private equity firms. The analysis, conducted by the Centre for Research on Socio-Cultural Change (CRESC) at the University of Manchester, highlights the growing influence of private equity in public procurement, raising questions about accountability and cost-effectiveness.
Scale of Private Equity Involvement
The study examined government contracts awarded between 2020 and 2025, covering sectors such as healthcare, social care, waste management, and IT services. It found that private equity-backed firms now account for approximately 9% of all public spending on contractors, equivalent to roughly 1 in every 11 pounds. This represents a significant increase from just 4% a decade ago, according to the report.
“The scale of private equity penetration into public services is staggering,” said Dr. Emma Smith, lead author of the report. “These firms are now major players in delivering essential services, yet their operations are often opaque, and their primary goal is to generate returns for investors, not necessarily to serve the public interest.”
Key Sectors and Examples
The report identifies social care as the sector most heavily dominated by private equity, with over 40% of spending on adult social care providers going to private equity-backed companies. In children’s social care, the figure is around 30%. Other sectors include waste management (25%), IT services (20%), and healthcare (15%). Notable examples include the outsourcing giant Serco, which is partially owned by private equity, and the care home operator HC-One, which is fully owned by a private equity consortium.
“Private equity firms often use high levels of debt to finance their acquisitions, which can lead to cost-cutting and a focus on short-term profits at the expense of service quality,” warned Professor John Appleby of the Nuffield Trust, who was not involved in the study. “There is a real risk that this model is not compatible with delivering high-quality public services.”
Concerns Over Transparency and Value for Money
The report raises serious concerns about the lack of transparency in private equity-backed contracts. It notes that many contracts are awarded without competitive tendering, and the financial structures of private equity firms make it difficult to track where public money ends up. The authors call for greater scrutiny and regulation of these arrangements.
“Taxpayers have a right to know how their money is being spent,” said Dr. Smith. “But the complex web of ownership and debt used by private equity firms makes it nearly impossible to assess whether we are getting value for money.” The report recommends that the government introduce mandatory reporting requirements for all private equity-backed contractors and establish an independent body to monitor their performance.
Government Response
A spokesperson for the Cabinet Office said the government is committed to ensuring that public money is spent wisely and that contractors deliver high-quality services. “We have already taken steps to improve transparency in public procurement, including the introduction of the Procurement Act 2023, which strengthens rules on conflicts of interest and requires greater disclosure of beneficial ownership,” the spokesperson said. “We will carefully consider the findings of this report.”
However, critics argue that more needs to be done. “The government has been too slow to act,” said Shadow Cabinet Office Minister Lucy Powell. “Private equity firms are making huge profits from public contracts while often cutting corners on staff pay and conditions. It’s time for a fundamental rethink of how we outsource public services.”
Impact on Workers and Service Users
The report also highlights the impact on workers and service users. It finds that private equity-backed firms are more likely to have lower staff-to-patient ratios in care homes and to pay lower wages compared to publicly owned or non-profit providers. In some cases, service users have reported a decline in the quality of care after a private equity takeover.
“When private equity takes over a care home, the focus shifts from caring for residents to maximizing profits,” said a representative from the trade union Unison. “We see staff being laid off, hours cut, and services reduced. This is not what the public wants or deserves.”
The report concludes that the growing role of private equity in public services poses a significant challenge to democratic accountability and the quality of public services. It calls for a national debate on the future of public procurement and the role of private profit in delivering essential services.
