Local authorities’ focus on ethical procurement means that 42% of top tier council spending – defined as councils with annual spend of at least £100m – is now with SMEs, according to research.
The study by Oxygen Finance also found that more than a quarter of local authority spending is now being done with local businesses.
Some 35% of councils are taking steps to provide financial support to businesses as they seek to stimulate the creation of local value.
However, the report noted that as local authorities increase their spending with SMEs, more businesses are increasingly dependent on prompt payment by these councils.
The study quoted government figures that show £26bn is owed to SMEs, while 70% of SMEs have used finance in the last 12 months.
The average large-sized local authority paid around 16,000 invoices late in 2015-16.
Ben Jackson, CEO at Oxygen, said: “Clearly the will in local government is there and the sustainable procurement focus is a terrific first step, but it does increase local, small and micro suppliers’ dependence on the council’s payment performance.
“In many cases, local authorities are the prime funders of their supply chains, while good corporate citizenship is embedded in their culture. However, in many cases far more can be done. As such, local government holds a unique opportunity.”
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