GB Energy creation demonstrates need to not completely cut consultancy

There is little the Conservative Party and Labour Party have agreed on at this election, but one point of consensus is the need to reduce government spending on external consultants.

In many ways this is understandable. Finances are tight and the tax burden is already high, so cutting costs is an attractive option, particularly given the sums involved.

Research by data group Tussell suggests major consultancy firms - Deloitte, EY, KPMG, PwC, McKinsey, BCG, Bain and Accenture - have collectively been awarded more than £7bn of public sector contracts since December 2019.

The Labour Party’s pledge to nearly halve that figure, for instance, therefore theoretically nets the UK Government a significant windfall.

But any future administration should be wary of turning their back on the consultancy sector entirely, which would be a false economy, and should instead focus on value.

By looking away from the traditional ‘Big Four’ consultancies to more dynamic firms, the incoming government can still lean on vital outside expertise to deliver on their ambitions in tight financial circumstances.

Take, for instance, the Labour Party’s plan to create Great British (GB) Energy. Sir Keir Starmer announced the plan at an event in Inverclyde, telling voters GB Energy would be “a publicly-owned clean energy company, funded by a proper windfall tax on oil and gas giants”.

But he then sparked confusion by shortly afterwards telling reporters GB Energy would in fact be “more of an investment vehicle that will have public and private sources of income”.

What is certain is it will have an £8.3bn price tag and be headquartered in Scotland, most likely Aberdeen. But - aside from the purpose, price tag and location - GB Energy is also doing a lot of political heavy-lifting for Starmer, particularly given the party has ditched its controversial £28bn-a-year Green Prosperity Plan.

Yet despite its importance to the Labour Party - and shortly, perhaps, the country - there has been scant consideration of how GB Energy will be set up, structured and go about its work. This is where consultants can add real value.

The energy sector is, after all, already a complex ecosystem - particularly when it comes to infrastructure - and ensuring GB Energy has the right structures and direction will be vital if it is to be both efficient and effective. The Labour Party’s ambition is to use GB Energy to help decarbonise the electricity grid by 2030 – a mammoth task that means the organisation will have to be up and running as quickly as possible after the election is over.

The fact GB Energy is a new body obviously offers significant advantages. Its structure can be created entirely from scratch, allowing it to utilise best practice and market-leading expertise. This is in contrast to other new public sector bodies, which can often be amalgamations of pre-existing groups or teams, which makes streamlining operations more complex.

Equally, as a new body GB Energy can utilise the most efficient and cutting-edge systems, allowing it greater agility when it comes to making investment decisions, and potentially offering greater efficiency for the taxpayer too. But a failure to use outside expertise to deliver such structures and innovation will risk the confidence not just of the public, but also of investors and the energy sector itself.

That is why Starmer should double-down on his commitment to headquarter GB Energy in Scotland and commit to Scotland’s world-class professional services sector having a role in GB Energy’s establishment too. Doing so will not only deliver efficiency for taxpayers and benefits for the economy, but it will help ensure GB Energy is a success too.

Richard Jacobs is the chief executive of consultancy firm Alba Partners