The Centre for Entrepreneurs is calling upon local authorities to do more business with small businesses. According to data compiled by the Centre’s campaign partner Spend Network, in the past three years a total of £9.9 billion has been spent by local authorities purchasing from 20 national suppliers.
By comparison, 78,000 small businesses throughout the UK have split £11.1 billion of council spending, indicating that for local authorities larger businesses remain the preferred go-to suppliers for purchasing requirements.
Fortunately, in some areas of the country this has begun to change – Monmouthshire City Council, for example, dedicated a quarter of its budget to purchasing from local firms during the past three years. At the other end of the scale, Barnsley Metropolitan Council boosted local suppliers with just 4.2 per cent of its budget during the period.
Centre for Entrepreneurs chairman Luke Johnson believes part of the problem lies with the purchasing process utilised by local authorities, which he called “complex, bureaucratic and tilted in favour of large incumbents.”
He continued; “For too long needless bureaucracy and limited transparency have protected cosy relationships between government and big business.
“Although central government has an explicit strategy to do 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.”
The report defines a small business as a company with an annual turnover of up to £6.5 million, and which counts no more than 50 workers as permanent staff members. Many companies of this type were established during the recession, as lower job security and concerns over redundancies persuaded a large number of entrepreneurs to set up their own firms.
In terms of the services most sought after from SMEs by local authorities, residential care services topped the table with £448.7 million of spending in the past three years. This was closely followed by construction with £313 million, then business support with £220.6 million during the period.
The Centre for Entrepreneurs is now calling for central government to take action in encouraging local authorities to support small suppliers within their areas, believing that the best way to do this would be to establish an annual league table charting progress made by UK councils in buying from SMEs.
By turning to SMEs for purchasing needs, local authorities can ensure spending remains within the local economy and help to boost employment within their regions. Hopefully, this report will be the incentive many need to begin supporting entrepreneurial firms within their areas.
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