Small businesses call for bigger slice of local authority spending

The Federation of Master Builders says the move would help smaller companies which often miss out on public sector work which goes to larger competitors.

Last week the Government set an ambitious target that £1 in every £3 it spends will be with small businesses by 2020. Matt Hancock, the Minister for the Cabinet Office, announced the new target to get more small businesses working on central government contracts. In 2013 to 2014, central government spent an unprecedented £11.4bn with small and medium-sized businesses – those employing 250 employees or less. This is equivalent to 26 per cent of central government spending.

The government wants to increase this to a third by 2020. This would mean an extra £3bn per year (in 2013 to 2014 terms) going to small and medium-sized firms directly or through the supply chain.

Sarah McMonagle, head of external affairs at the FMB, said: “The Government’s announcement that every £1 in £3 is spent with small businesses is welcome but only applies to central government contracts.

“We want to see an increase in spending with small and micro firms across the board and by every public sector body. In many parts of the country, it is still the case that small firms are all too often squeezed out by larger competitors when bidding for public sector work.”

The Federation of Master Builders is the UK’s largest trade association in the building industry, with national offices in England, Northern Ireland, Scotland and Wales, supported by additional regional offices. Ms McMonagle said there are lots of good reasons why the wider public sector should spend as much as possible with small firms.

“In particular, using construction SMEs has been proven to provide real local economic and environmental benefits. SMEs employ local people, meaning that the money spent is likely to go to local suppliers and remain within the local economy.

“Furthermore, in the construction sector, two-thirds of apprentices are trained by micro firms, meaning that spending more with these businesses could help towards the Government’s target of creating three million new apprenticeships by 2020.”

She said that the public sector should implement the EU Pubic Procurement Directive which was introduced earlier this year. “Some local authorities and housing associations are better at engaging with SMEs than others but we’re urging all public sector clients to set a target for increasing the proportion they spend with SMEs.

“Some may already be spending £1 in every £3 but then they should be working towards spending £2 in every £3. One way the wider public sector can boost engagement in public procurement by small firms is to ensure they are implementing the EU Public Procurement Directive which was brought in earlier this year.

“The Directive states that public sector clients must break down their contracts into small lots and this makes public contracts much more appealing to small businesses – especially in construction where forming part of the supply chain can be particularly problematic due to late payment.”