Supply chain · 7 December 2015

Government comes good on small business spending after breaking 25 per cent barrier

More public sector contracts are being directed to smaller operators
More public sector contracts are being directed to smaller operators

The financial year 2014-15 saw the British government spend £12.1bn with small businesses, representing 27.1 per cent of central government buying and over the 25 per cent target.

Prior to coming into power in May, the Conservatives outlined a commitment to up SME spending to a third of central government procurement – both directly or via the supply chain – by 2020. Some seven months later, the government believes it is in a “good position” to do this and support the small business operators out there.

Documents revealed by the Cabinet Office provide a comprehensive breakdown of SME spending by the 17 government departments. Leading the way when it comes to allocating public sector contracts to SMEs were the Ministry of Justice (41.6 per cent) the Department for International Development (38.8 per cent) and the Department for Culture, Media & Sport (37.5 per cent).

From a total procurement spend of £44.8bn, 10.9 per cent was spent directly with SMEs and 16.2 per cent indirectly. Those figures are up from 10.3 per cent and 15.7 per cent respectively from 2013-14.

Matt Hancock, former business and enterprise minister and now minister for the Cabinet Office and paymaster general, said: “Small businesses are the lifeblood of the UK economy and […] I want to see as many of them as possible competing for and winning public sector contracts.

“I want to turbocharge our ambitions for small business and have £1 in every £3 of government spend going to small businesses by 2020. I look forward to seeing even more of our big suppliers sign up to the prompt payment code, and help the small businesses in their supply chain.”

To Prompt Payment Code is designed to encourage more small firms to tender for government contracts by making it more likely each will be paid on time. At this stage, 17 of the government’s 33 “strategic suppliers” have signed up to the Prompt Payment Code.

John Manzoni, chief executive of the Civil Service, added: “I’ve seen for myself how innovative small business can be and government should be benefiting from what they can offer. That’s why today of all days, it’s great to see that we’re making good on our promise to open up public sector procurement to businesses of all sizes, and by creating this more diverse marketplace, we’re helping to stimulate local economies and delivering greater innovation and value for money for the taxpayer.”

Recent research by Millstream Associates found that public sector contracts being tendered to private small business doubled during Christmas last year. This year, the firm found that Christmas-related tender notices were already up by 28 per cent.

Millstream managing director Tim Williams explained: “Public sector tenders for this time of year can be very lucrative to businesses large and small, particularly smaller scale local suppliers where the majority of Christmas related contracts are targeted with a worth of £5,000 – £50,000. Whilst the larger scale events and productions are estimated between £100,000 – £500,000.”

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Hunter Ruthven was previously editor of Business Advice. He was also the editor of Real Business, the UK's most-read website for entrepreneurs and business leaders at the helm of growing SMEs.