Government Contracts Still Out of Reach for Many SMEs

August 8, 2024

Only 20% of direct procurement spend from the wider public sector (including central government) went to SMEs in 2023, according to the latest report by the British Chambers of Commerce and data provider Tussell.  

 

The BCC’s SME Procurement Tracker powered by Tussell – now in its second year – is the market’s benchmark source for reporting on how well the government is supporting small businesses by doing business with them. 

 

The report reveals that while absolute public spending directly with SMEs has grown over the past 6 years, SMEs only make up a fifth of overall spending last year. It was the same as 2023 (20%) and only slightly up on 2018 (18%).  

 

Based on open procurement expenditure data published by public bodies for transparency purposes and then analysed by Tussell, the value of reported procurement expenditure by the UK Government in 2023, was £194.8bn. 

 

Local government had the highest procurement spend directly with SMEs last year, both as a share of total procurement spend (34%) and in absolute terms (£24.1bn).  

 

Public sector spend with SMEs varies across different sectors. The Health and Social Care sector earned £11.9bn in direct public sector revenue in 2023. This accounts for 34% of total public spend in the sector, up from 29% in 2018. £4.0bn was spent on public sector spending with SMEs in education, training and recruitment.  

 

Within central government, the Department for Culture, Media and Sport spent the highest proportion of its procurement spend directly with SMEs in 2023. DCMS spent 29% of its procurement total (equivalent to £256m). The Department for Education spent the highest absolute amount directly with SMEs, amounting to £2.0bn in 2023, or 25% of its total procurement spend.  

 

Jonny Haseldine, Policy Manager at the British Chambers of Commerce said: 

 

“While it’s welcome the value of SME procurement contracts is continuing to increase, government deals remain out of reach for too many businesses.  

 

“It is vital that public bodies always consider SMEs when tendering contracts.  

 

“Central government can learn lessons from local authorities who are consistently spending more on SMEs deals. We’d welcome further devolution of decision making to allow more procurement contracts to be awarded at a local level.  

 

“The Procurement Act coming into force at the end of October has the potential to make the system simpler and more transparent for businesses. In addition, it’s crucial we hear more from the new government on their pledge to give SMEs greater access to contracts. 

 

“Businesses up and down the country want to see a reformed process in which they can properly compete.” 

 

Gus Tugendhat, Founder of Tussell said: 

 

“We’re delighted to partner with the British Chamber of Commerce to produce the market’s reference statistics on how much the government purchases directly from small businesses.  

“Our joint SME Procurement Tracker uncovers how well the government is delivering against its objective of supporting SMEs by doing business with more of them, highlighting significant trends and data-led opportunities for improvement.  

 

“We hope that our findings will help policy-makers across all parts of government to support local communities by reducing the official obstacles to awarding public contracts to small businesses.”