The UK's £82b Customer Service Problem

Much has been written about the progressive deterioration of customer service over the past decade, but how bad is it, why is it happening, and what can be done about it?

Organizations across the UK spend an incredible £31 billion/yr in customer service, fielding 5 billion+ calls at an average cost of £6.26 each split across:

• Financial Services – 24%
• Telecoms – 17%
• Technology – 17%
• Public Sector – 10%
• Retail – 10%
• Utilities – 8%
• Other 14%

While the £31 billion organizations invest annually is huge, it’s outweighed by the £51 billion cost to consumers through lost time and productivity:

• 7 mins average hold time/call (vs. 20 seconds best practice)
• 7 mins 12s average call duration
• 14 mins 12s total average call time x 5 billion calls x £43 average UK wage/hr

One of the most extreme examples of poor service is HMRC, highlighted by the National Audit Office:

• £881M in taxpayer expense on servicing (phone, digital, postal channels)
• 38 million calls/year
• 15 million unanswered calls/year
• 23 min average wait time (3.3x national average)
• 15 min average call duration (2.1x national average)
• £869M additional cost to customers in wasted time

With the budget later this month, the Treasury could do a lot worse than look within its own department and take radical action to address this huge waste!

Service is the window into a product. It immediately shows how good (or bad) the customer experience is and how well the product is designed.

Returning to HMRC, the NAO notes that 72% of all customer interactions are the result of “failure demand”. In short, UK PLC’s billing system, capturing £0.9 trillion in annual tax revenues, is broken. With the right leadership, focus and capabilities, HMRC could eliminate almost ¾ of its service demand, saving a combined £1.3B for taxpayers and consumers.

The impact of poor service design extends far beyond the direct costs to organizations and indirect costs to their customers. Poor service and product design costs revenue. Consumers are increasingly making buying decisions based entirely on their servicing experience:

• 42% of consumers have switched service providers because of poor service
• 17% have switched multiple times
• 60% of 25-34 year olds have switched

Many organizations still view servicing through a narrow operational and cost lens. Taking a more strategic view that considers the holistic customer experience presents a real opportunity for organizations to differentiate themselves, turning a potential liability into a tangible asset that can be measured in incremental revenues from improved customer loyalty and retention.

There are 5 key steps organizations can take to improve their customer experience by embedding feedback from their customer servicing operations:

1. Focus on First Time Resolution (FTR): Many servicing operations focus on cost alone, driven by total call numbers, average speed of answer, and average handle time, but the “magic metric” for any servicing operation is the ability to resolve an issue first time. This means empowering CSRs with the right knowledge and permissions to address the most common issues quickly, and efficiently.

2. Roadmap Automation: Using a data-driven approach to capture and embed top call-driver reasons into the product roadmap is critical. Over time, this eliminates the most common friction points, enabling greater self-service, improving customer satisfaction and loyalty.

3. Edge Case Quantification: Customer experience typically focuses on “happy path” journeys, but quantifying how many customers end up in “edge cases” and systematically addressing those use cases significantly improves the service experience. Often viewed as the “long tail” within servicing operations, identifying linkages between issues and through robust root cause analysis is key to delivering better outcomes.

4. Selective AI Enablement: Used in the right way, AI can generate significant benefits. Focusing on “human in the loop” approaches that empower CSRs with accelerated access to knowledge bases and real-time sentiment analysis will deliver better outcomes vs. “full” automation. It’s important to remain equally focused on FTR as the “magic metric” vs. benefits from average handle time and speed to answer reductions – the latter will reduce cost, but may not improve the overall customer experience.

5. Focus on Quality vs. Quantity of Customer Interactions: Customer servicing presents a tremendous opportunity to create “magic moments” that differentiate brands and drive improved customer loyalty and associated revenues. Octopus Energy is a great example of an organization that has turned a cost-centre into a valuable brand asset, using it to differentiate itself from the competition. It’s critical to measure and actively manage customer sentiment and satisfaction within servicing in concert with managing costs.

At EA, we’re focused on helping our clients unlock growth in a rapidly changing world, by partnering with them to understand and address their unique challenges. Our sole focus is on driving business outcomes, designing and deploying growth initiatives and measuring their quantitative impact. Find out how we can help your organization deliver growth through your servicing operation today.

Tom Harris, Partner, CCO

November 2025