Procurement · 22 February 2016

Northern Powerhouse councils failing to engage small firms

Local councils have so far failed to meet Northern Powerhouse procurement targets.
Local councils have so far failed to meet Northern Powerhouse procurement targets.

Over half of local councils in the North of England are missing the government’s pledge to spend £1 in every £3 with small businesses, with the problem especially acute when it comes to outsourcing IT activities, new research has shown.

In signs that local authorities might be failing to meet government demands under the Northern Powerhouse initiative, around 54 per cent of key councils in the north said that none of its IT services budget was spent with small firms, whilst 86 per cent reported that there are no plans to increase the allocation of IT services to SME suppliers.

New research conducted by IT services aggregator Streamwire suggested a disconnect between government policy to encourage local authorities to spend with small businesses, and the actual spending habits of councils.

Set out by the chancellor George Osborne, the Northern Powerhouse initiative aims to soften the economic divide between the North and South of England by improving infrastructure and attracting investment towards northern towns and cities.

Of the 34 councils included in the reach of the Northern Powerhouse, 15 were found not to spend any IT services budget with smaller contractors. Whilst eight councils claimed to outsource a proportion of IT services to small firms, just three reported to spend a third or more of budgets with small businesses.

Urging councils to make more concerted efforts to spend with small businesses, Streamwire CEO Anne Stokes said: “The aim of the Northern Powerhouse was to establish the north as a beacon for ‘doing things differently’, strengthening the area as an economic hub and showcasing how other regions could adopt similar innovation and best practice.”

“Councils can play a powerful role by using budgets to procure from small, regional businesses. Unless local councils take up this mantle, the government’s goal of building an economic stronghold in the north is surely going to be difficult to achieve sustainably,” added Stokes.

Northern Powerhouse councils were defined by the study as those in the Liverpool City region Combined Authority, the Greater Manchester Combined Authority, the West Yorkshire Combined Authority, the Sheffield Combined Authority, the Humber Local Enterprise Partnership and the North East Combined Authority.

Councils in Durham and Wakefield, were found to be striving to work with small businesses the most, each spending 48 per cent and 41.9 per cent of IT budgets on small businesses respectively. However, the research also highlighted the “worrying” examples of Oldham and Sefton councils, both of which are locked into over ten year-long contracts with large suppliers.

“These findings could be seen as indicative of a wider issue in local government procurement nationwide,” Stokes went on to say.

“For local councils to match government promises to nurture the UK’s small business environment, there needs to be a drastic change in local IT outsourcing policies. Large suppliers are generally unable to offer the agile and cost-effective approaches that small firms can provide, and councils are likely over-spending on inflexible services. This is not only going to do harm to local small businesses across the UK, but also to British taxpayers.”

“A disaggregated strategy, employing multiple small IT providers instead of one large supplier, can enable the public sector to save both time and costs with easy migration to different providers for optimum efficiency and service.”

Is the Northern Powerhouse succeeding? A recent BBC survey found that most people in the North of England have never heard of it.

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ABOUT THE EXPERT

Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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