‘Financial pandemic’: £1 in every £11 spent on UK public contractors goes to private equity | Public finance
One pound of every £11 the UK government spent on contractors went to private equity-controlled companies last year, research has shown, including on essential services such as transport, waste management and healthcare.
Politicians and economists have expressed concern about the “financial fragility and sharp cost cuts” created by private equity-backed firms, which often have high levels of debt, and the “conflicting interests” in running public services for maximum profit.
Private equity firms are investment companies that raise money from investors and banks, buy and manage other companies, and eventually resell them for a profit. Some have described the rapid expansion of private capital into public and private services as a “financial epidemic” whose scale the government has yet to fully grasp.
The Guardian’s exclusive analysis found that almost £24.4bn of public spending on contractors by April 2025 went to companies controlled by a private equity firm; this is equivalent to 8.8% of government contracts.
The investigation, based on procurement data provided by public sector market intelligence firm Tussell, company records, market data from financial database PitchBook and reported public information, reveals for the first time the extent of private capital’s stake in Britain’s public services.
Almost £9.8bn of contracts from local councils went to companies, the majority controlled by private equity firms; This represents an estimated 10% of its external spending in the year to April 2025. This includes more than half a billion paid to an infrastructure group controlled by private equity group CVC Capital Partners that provides services in water, energy, transportation and telecoms.
More than £5bn of NHS contracts (10.7% of external spend) were awarded to private equity-backed firms last year.
Among the top buyers was a business software company jointly controlled by private equity firms Hg Capital and TA Associates, which received almost £1bn. Nearly £500 million went to a pharmaceutical and healthcare company controlled by London-based Vitruvian Partners.
The Guardian has previously reported how private equity firms are growing behind childcare providers and supplying childcare centers across the UK, as well as how millions of pounds of taxpayers’ money have been paid to private equity groups to provide support for victims of rape and sexual assault.
UK Private Capital, the body for the private equity and venture capital industry, said such firms play a vital role in the British economy by improving productivity, attracting international investment and supporting innovation.
But the potential risks of private equity firms’ increasing involvement in the British economy have been highlighted by the collapse of private equity-backed companies and well-known high street brands in the adult social care sector.
Crisis in Thames Water deepened with the cash extraction of private capitaland private equity have been linked to fears of closures and job losses in the pharmacy industry, and “child care deserts” In the poor neighborhoods of England.
The new analysis also found that the transportation sector is heavily dependent on private capital. Arriva, which operates numerous train operating companies and hundreds of bus routes across the UK, was acquired by US private equity firm I Squared Capital in 2024.
Almost £600 million (equivalent to 11%) of the Department for Education’s external spending went to majority-backed private equity firms. This included BPP Education Group, controlled by funds managed by TDR Capital, and Portakabin, which was acquired by French-based Antin Infrastructure Partners in June 2024.
In response to the Guardian, UK Private Capital said private equity and venture capital firms “contribute to roughly 9% of private sector GDP” and support “around 13,000 UK businesses, nine in 10 of which are small or medium-sized enterprises”.
They argued the sector would raise £58.7bn in 2025, the majority from overseas investors, “leading to growth” of UK businesses. They said the largest privately owned businesses in the country are also subject to this law. Walker guidelines on disclosure and transparency in private equity.
Natalie Bennett, the former leader of the Green Party and author of Change Everything: How We Can Rethink, Repair and Rebuild Society, said she believed private capital had become a “financial epidemic” in British society.
“We’ve seen a huge boom in that. And basically, if you’re running something for profit, a lot of times you’re not running it for the benefit of the people who need the service,” he said. “Austerity and cuts to local council funding have certainly gotten us here, but more than that, it has been a triumph of ideology.
“We’ve accepted this ideological assumption that the private sector has to be better. But we’re talking about the filthy rich. And the people who pay are the most vulnerable.”
He criticized the government for not implementing tougher rules to restrict private capital from making profits in the childcare sector. “The government is trying to manage the mess we are in, not to chart a way out of it. But [private equity] “He will twist and dodge and turn and find a new way to game the system,” he said.
Ludovic Phalippou, professor of financial economics at the University of Oxford’s Saïd business school, is widely recognized as one of the most influential academic voices in the world of private equity. His criticisms of the industry have often led to rejection from some of the biggest companies.
The problem does not lie with private equity per se, he said, but with the way these firms often have disproportionately large amounts of debt, which makes them more vulnerable to shocks.
“The key risk is not just ‘private equity’. It is for-profit procurement plus high leverage in an essential service where the state has little leeway and likely low ability to write contracts and negotiate prices,” he said.
Sarah Longlands, chief executive of think tank the Center for Local Economies, said private capital’s involvement in public services creates “conflicting motivations” that reduce the quality of services.
“This desire to maximize profits will put downward pressure on the way services are operated and run, which is why you end up with a scenario where care workers earn such low amounts.”
He said local authorities need to show more care and curiosity about who they award contracts to. “There’s an assumption, even among many government politicians, that this is the way things are currently done. But I think there are some really serious questions about how agnostic we can afford to be about the economic model behind this.”
Q&A
Methodology: How did the Guardian predict private equity firms’ involvement in the British economy?
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The Guardian’s investigation into the scale of private equity firms in the British economy combines acquisition data provided by Tussell, employment ONS data, information from the PitchBook financial database, publicly available data from Companies House and information from companies’ annual accounts.
Using data from Companies House, the Guardian was able to establish the group structure of thousands of UK companies, as well as identify the ultimate controlling parties of each, as disclosed in their annual accounts.
We then used the Large Language Model (LLM) to collect information about each ultimate controlling party. A team of five journalists manually verified the responses from LLM by checking the information against annual accounts, the companies’ own websites, news articles and databases specializing in private capital markets, such as PitchBook. This process allowed us to identify which parent companies were private equity firms or companies that were majority backed by private equity firms.
The final list of companies ultimately controlled by private equity was matched with fiscal year April 2025 public procurement data provided by Tussell to find out how much money was paid for services provided by firms controlled by private equity.
The Guardian also collected information from Companies House about the main sector of the economy in which the company operates (SIC codes). The team also used mastermining to extract the average number of employees each company declared in its annual report. A team of three verified the results manually.
Where possible, the analysis includes the figure for the company’s average number of employees. However, a minority of companies published only consolidated accounts; This means that the number of employees reported is for the entire group as opposed to just those who work for the company.
On the other hand, a similar proportion of non-operating companies did not report the number of employees or did not open any accounts.
To avoid double counting employees when reporting company consolidated accounts, we subtract the number of workers listed in the annual accounts of other companies in the group from the group figure. International employees of the largest employers have also been omitted – where possible – to count only British workers.
The final number of unconsolidated employees was then aggregated by sector using SIC codes and compared with employment data from the ONS to calculate the proportion of people employed by a company controlled by private equity.
The Guardian methodology differs from similar analyzes carried out by the Bank of England and consultancy EY in terms of the number of companies analyzed and the period, the approach to consolidated accounts and the types of companies included (Guardian venture capital and private credit companies excluded).
The Guardian’s analysis is a snapshot of private equity firms’ involvement in the British economy.
Additional reporting by Pamela Duncan Yassin El-Moudden, Isaaq Tomkins and Krystina Shveda
