Councils urged to purchase more from small firms to boost economy

Gurjit Degun
3 September 2014

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3 September 2014 | Gurjit Degun

Local authorities should buy more from small businesses to boost local economic growth, according to a group of entrepreneurs.

According to research from think tank the Centre for Entrepreneurs, 78,128 small businesses are doing business with English and Welsh councils, earning more than £11.1 billion over the past three years. But, over the same period, 20 large businesses took a combined £9.9 billion.

More than a quarter (25.6 per cent) of Monmouthshire County Council’s spend goes to small firms but according to the study Barnsley Metropolitan Council spends just 4.2 per cent with small companies. 

Analysis by the Centre for Entrepreneurs and data company Spend Network found the level of spending with small firms does not depend on the financial size of the council, its location, local earnings, political control or the rural/urban status.

“A council’s set of priorities is the primary factor influencing spend with small firms, indicating that having a spend small policy and implementing it could be transformative,” the report said.

The Centre for Entrepreneurs has called on the government to create an annual league table, highlighting the progress made by UK councils in buying from small businesses. The report also recommended that every UK public body should publish all spend over £500 rather than the current £25,000 minimum for some public bodies. It added: "Every public body should link spend data to tenders and contracts awarded to help identify procurable spend."

Centre for Entrepreneurs chairman and entrepreneur Luke Johnson said: “One of the best ways that government can support small businesses is buying from them. Sadly, many entrepreneurs struggle to win business from government, finding the process to be complex, bureaucratic and tilted in favour of large incumbents.

“Although central government has an explicit strategy to do more business with small firms, the same cannot be said for local authorities, so performance varies widely. Given the opportunity, small, entrepreneurial firms are proving they can cut costs and drive innovation in the public sector, while boosting their local economies.”

Councillor Alan Gardiner, cabinet spokesman for corporate services at Barnsley Metropolitan Council, refuted this. “We have serious concerns in regards to how these figures have been arrived at, as we know that we spend closer to 50 per cent of our budget with small-to-medium enterprises (SMEs)," he said. "Because councils report differently, and because the information contained or omitted isn’t consistent, the open source methodology used by the report is distorting the true position. We have always made it easy for small businesses to work with us, and our 2013-2016 Corporate Plan has improved things even further. We’re not rated in the top 10 in the 'best councils to do business with' awards for nothing.”

However, the Centre for Entrepreneurs said that the data excludes medium-sized companies. "This means that the figures will not match council figures which normally calculate SME spend rather than just small firm spend," Matt Smith, director at the Centre for Entrepreneurs told SM. "Regardless, we have used published spend data and a transparent definition of what constitutes company spend and what is a small firm. Only through such transparency of data and methodology can figures be trusted and reliably compared between councils."

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