The UK government has increased spending on overseas suppliers despite a vow to “buy British”, according to a report.
Public sector market intelligence firm Tussell said the UK public sector spent £18bn with overseas suppliers in 2020, up by 11% on 2019.
Ironically, the department which most relied on overseas suppliers in terms of proportion of spend was the Department for Exiting the European Union (DExEU), which saw 71% of its total procurement spend go to overseas vendors.
The Ministry of Defence (MoD) was the biggest overall spender with overseas suppliers, with $9.3bn of its contracts going overseas.
And almost 30% of UK public sector spend in the IT sector went to overseas suppliers, said the report.
The government has identified public procurement as an opportunity to help UK-based SMEs win more government business and in 2019 prime minister Boris Johnson promised more support for British firms.
The overall market share of overseas suppliers has marginally decreased over the last four years, but the total value has consistently risen and in 2020 represented 13% of total spend, said the report.
Compared to 2017, the amount spent on overseas suppliers went up 27%, while spending on domestic suppliers went up by 47%.
American firms accounted for most overseas contracts over the period 2017-20 (£19.3bn) while France followed with £16.3bn.
Some of the largest US contracts went to companies operating in IT, engineering and science such as KBR, IBM and Jacobs, which have large contracts with major departments such as the MoD, Home Office and HM Revenue and Customs.
Spend with French suppliers went mainly to IT and utilities firms such as EDF and Engie.
Three-quarters (75%) of spend with firms from Spain, the next most important country in terms of overseas contracting, went to infrastructure provider Amey, which earned £6.8bn from UK government work.
Amey was also the company to receive most government spending overall, followed by US firm Jacobs, and France’s EDF and Atos.
The remaining top 10 recipients of UK government overseas spending were Germany, Sweden, Netherlands, Ireland, Japan, Switzerland and Canada.
An overall rise in central government spending with overseas suppliers by £1.1bn from 2019 to 2020 was partially due to large Covid-19-related contracts awarded to foreign companies, the report found.
So far in 2021 52% of the value of all Covid contracts has gone to overseas suppliers. In 2020 one in three Covid-related contracts went to overseas suppliers and the public sector has spent £13bn on Covid-related contracts with foreign suppliers.
US and French firms were the big winners while Chinese suppliers also won large contracts from the Department of Health and Social Care to supply PPE and medical equipment.
Seven out of 10 of the top foreign suppliers for Covid-19 related contracts by value were US firms, with the US’s Innova Medical Group and Iqvuia in first and second place, followed by France’s Sodexo.
The report identified an opportunity for UK suppliers, pointing out that £27bn worth of contracts for services will expire in 2022-23, with many likely to be re-tendered.
But it warned this could also benefit overseas vendors, depending on the extent to which international trade agreements allowed preferential treatment for local suppliers.
“Although UK suppliers are currently delivering most major services contracts, this could easily swing towards overseas suppliers in the future, as the new procurement rules that allow buyers to favour domestic suppliers do not apply to high-value contracts,” said the report.
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