Local authority procurement is “tilted in favour” of big business, with as little as 4 per cent of some councils’ budgets going to small suppliers.
An analysis of spending by 158 local authorities over three years found that almost £10 billion was spent with only 20 big companies, while 78,000 small companies shared just over £11 billion.
The Centre for Entrepreneurs, the think-tank that commissioned the research, said that local authorities must take steps to make it easier for small suppliers to win business.
It added that procurement performance varied widely between councils. Barnsley and Sheffield councils were the worst, with just over 4 per cent of their respective spending going to smaller companies. Manchester City Council delivered only 6.5 per cent.
The average of 12.5 per cent of local government budgets that go to suppliers with fewer than 50 staff is half of central government’s SME procurement target.
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The centre called for every authority to publish a pipeline of contracts becoming available in the coming year and for each to have a clear policy and outreach programme to engage with local business owners.
Luke Johnson, the chairman of the think-tank, said: “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.”
Monmouthshire County Council, in Wales, was the best performer, with 25.6 per cent of its direct spending being awarded to small businesses. The think-tank called this a “substantial achievement” and said councils should follow Monmouthshire’s example.