The current context: austerity, inflation, crises

The public spending landscape has shifted since 2010. First austerity, then Brexit and Covid-19, now cost-of-living and defence demands have squeezed resources. Chancellor Rachel Reeves confirmed a 15% reduction in running costs by 2030, including 10,000 civil service cuts. Automation is pivotal, with AI flagged as a route to drive efficiency. But shared services are still seen as a natural route to maintain services whilst removing significant costs.

Against this backdrop, the question becomes: how do we make shared services work harder, smarter, faster – without sacrificing local value and operational integrity?

The shared services promise

Shared services bring several conceptual advantages:

• Economies of scale: By centralising functions across multiple agencies, fixed costs (systems, contracts, personnel) can be spread more thinly.
• Cost savings: Reduced duplication, shared infrastructure, and streamlined staffing should free up budgets.
• Efficiency gains: Standardised, centralised workflows can cut errors, improve cycle times, and simplify management.
• Better technology adoption: Shared teams can afford sophisticated tools – cloud, automation, AI – more readily than single overburdened departments.
• Improved service quality: Larger pools of expertise and consistent standards can raise the baseline of support across departments.

These are compelling benefits, and the Cabinet Office has made them central to its strategy. 

‘Bigger’ in theory

Shared services in government: progress, promises and persistent challenges

For more than two decades, UK central government has sought to streamline back-office functions – such as HR, finance, procurement and payroll – through shared services. These functions support over 450,000 civil servants but continue to cost taxpayers more than £500m annually.

The Cabinet Office’s 2021 Shared Services Strategy brought renewed ambition, grouping departments into five clusters and focusing on cloud-based technologies, standardised processes, and better data use. While some progress has been made, concerns remain.

To avoid repeating past failures, success will depend on:

• Robust contingency planning.
• Sufficient and sustained funding.
• Clear, measurable benefits.
• Ongoing progress monitoring.

Ultimately, shared services must not only cut costs – they must also free up resources to improve frontline services across government. The challenge now is turning strategy into lasting delivery.

Bigger shared services are appealing: more departments mean greater purchasing power, centralised contracts, larger talent pools, and the ability to absorb peaks and troughs in demand. A well-executed cluster model could also roll out modernisation more quickly, helping lift lagging agencies into the cloud, or deploying emerging tech like AI and automation.

But reality paints a grittier picture

Drawing on my experience in developing and running shared services in local government regionally and in London, I’ve seen a number of common pitfalls:

1. Complexity and bureaucracy

Bigger organisations rarely stay nimble. Individual departments have unique perspectives on how to configure software, define workflows, and handle exceptions. A one-size-fits-all system may simplify administration, but it often introduces rigidity.

What worked well locally becomes cumbersome when stretched across multiple legacy systems – common configurations morph into complex compromises that please no one. Sharing common systems between shared services partners also runs into challenges of sovereignty and a natural resistance from staff working in those organisations to be made to adopt a new system.

2. Loss of control and customisation

Smaller service teams can tailor services closely to their “customer” departments. Once shared services scale up, customisation tends to get rolled back or standardised. In one local council I worked with, a small team with specialised HR and procurement requirements felt sidelined with the transition to standardised partnership systems.

Bureaucratic reluctance to diverge from standard templates can breed resentment, which is something I witnessed in joint services, where local needs were eclipsed by national templates for regulatory requirements.

3. Implementation and change management failures

Change is expensive – not just in licensing and infrastructure, but in staff upheaval, training costs, and disruption to ongoing services. This was witnessed in some of the complexities involved in the business model of a shared service between some district councils in rural county.  The National Audit Office (NAO) expressed concerns about insufficient planning, fragmented governance and delays forcing costly extensions to legacy systems.

My experience confirms this: roll-outs of system migrations for several London councils sharing an ERP system were often slower and costlier than expected, and poorly communicated timelines led to low staff morale and underutilised systems. This particular shared service for an ERP system was eventually wound up after several years.

4. Risk of oversized ecntralisation

Larger shared service centres can turn into sprawling bureaucracies, lacking accountability. With no single departmental head feeling responsible, performance can suffer. Centralisation often means decisions are made far from local contexts, reducing responsiveness. Detached governance led to delays, unclear ownership, and weakened risk management – as the NAO warned. Again, in my experience there is a challenge in sovereignty around which partner is prioritised in decisions and challenging are al all the partners getting their fair share of resources.

Finding the balance – a hybrid and clustered approach

My experience of shared services has led me to the view not that rather than a colossal monolith, a smarter path lies in what I call hybridity:

1. Functional clusters, not one-size-fits-all

Divide clusters by shared need – like payroll across similar agencies, HR across others, or finance systems by complexity. Target administrative functions with strong uptake potential and budget levers. Avoid areas needing high personalisation – say, specialist project management or local social services.

2. Robust governance with shared accountability

Effective shared services require clear governance: senior responsibility across client departments, strong programme management and transparent reporting. Avoid fragmented cabinets and inter-departmental turf wars by empowering joint decision-making boards. Alongside this board sponsorship and relationship building between the shared services partner boards is essential.

3. Build in flexibility and customisation

Using modular platforms and scalable architecture that support standardisation but allow custom extension. Maintain support for local variants while keeping the core consolidated.

4. Approach scale incrementally

Stagger onboarding. Start with 2–3 departments per cluster, prove value, then expand. Avoid overloading suppliers and integration teams. NAO recommends staging procurement to avoid simultaneous cluster rollouts nao.org.uk+1nao.org.uk+1.

5. Embed automation (AI) early

Develop architecture plans and automation planning across clusters from day one. This not only cuts administrative load but also builds capacity for more intelligent tools. Embrace continuous improvement rather than static milestones.

6. Measure progress and benefits clearly

Set clear KPIs tied to cost savings, service quality (speed, error rates), user satisfaction, staff efficiency and deployment milestones. Regular, comparable performance data builds accountability and buy-in. Critical for any programme of change.

7. Invest in change and skills

Focus on staff retraining and redeployment. Voluntary exit schemes can help reduce headcount sensitively, but to maintain morale you need active reskilling programmes – especially around digital and automation.

Back to the question we started with: Is bigger really better?

Yes, if done right. Bigger can unlock scale, standardisation, and purchasing power. But “bigger” must not mean unwieldy, inflexible, or monolithic. The secret lies in smart scale: strategic, staged, modular, outcome focused.

The NAO’s 2022 report gives clear signals: without stronger governance, funding certainty, and process/data alignment, bigger shared services risk repeating past mistakes nao.org.uk+3nao.org.uk+3nao.org.uk+3. My own frontline experience confirms that success isn’t automatic, it requires careful implementation.

Shared services are not a miracle cure, but with the right framework they can deliver. Bigger means more, but more only works when it’s thoughtfully structured, well-governed and iteratively refined. The goal is sustainable scale, not just size.

As civil service budgets tighten, local government and higher education braces against new strains, and digital transformation accelerates, shared services must be smarter, not just larger. The NAO has raised the red flag: without clearer benefit definitions, better funding, and stronger oversight, the ambition may fall short nao.org.uk+1nao.org.uk+1. But that’s not a verdict – rather, a call to strategic action.

Right now, the UK stands at a shared-services inflection point. Let’s make size work – for everyone.

Sean Green is Birkbeck University interim CIO and has extensive experience in the UK public sector.