Member Article

SMEs could leverage £788m for local economies

More than half of local authority money spent with small firms is put back into the local economy, suggests a piece of research from the Federation of Small Businesses.

£8.7m was spent by UK local authorities on good and services last year, a surveyed conducted by FSB and the Centre for Local Economic Strategies showed.

The report suggests that for every £1 spent with an SME, 63p was re-spent in the local area, compared to just 40p with larger businesses.

Business Secretary, Vince Cable, said: “This report shows what I have known for a long time - more of our small and medium sized companies must get a fair share of public contracts.

“In central government we are already trying to level the playing field with an aspirational target that 25 per cent of our contracts should be awarded to small and medium sized enterprises by 2015. To make this happen, we have put measures in place. A new website that provides free access to public sector contract opportunities worth over £10,000, the abolition of pre-qualification questionnaires for contracts under £100,000 in value, and the appointment of a Crown Representative for SMEs will all help.

“But there’s more we can do. We are currently working on Lord Young’s ‘single market’ recommendation to establish a simple and consistent approach for all public sector procurement contracts. This should mean more SMEs can take advantage of the £230 billion of potential business each year.”

The FSB are calling on local authorities to spend with SMEs and say that if each authority spent an additional 5% of their budget locally and committed just 3% more of that to small local firms, an additional £788 million could have been generated for local economies.

Cllr Peter Fleming, chair of the LGA’s Improvement and Innovation Board, said: “Councils have a vital role to play in driving economic growth by helping create the right infrastructure and environment at a local level to enable business to succeed, from maintaining roads to helping companies cut down on their energy bills.

“At the heart of this, councils are ensuring that they themselves are open for business, in particular working with SMEs and local suppliers to make it easier for them to bid successfully for public contracts on everything from building houses to caring for the elderly.

“By spending money locally we know that we are helping to pay the wages of local people, giving them money to spend in local shops and helping the whole local economy as a result.

“Half of all council contracts are now awarded to small and medium-sized businesses compared to just 13 per cent for central government, and we will continue to work with the FSB to seek out and promote best practice from councils who are simplifying procurement practices and finding new ways to help their local small businesses compete.”

Ted Salmon, North East regional chairman, Federation of Small Businesses, said: “This report shows the power and strength of small firms to create jobs and growth in the local economy if they are given the help to do so. With budgets being cut there seems to be an increasing realisation that spending more locally will benefit the local economy. The evidence speaks for itself. Spending locally invests in jobs and growth for the area. We want to see more of this happening across the country.

“Engagement with small firms is essential. While our members do win contracts, many are still deterred by the process. We had a good response to the survey which shows local authorities working with SMEs, but we say that more of this will help boost the local economy.

“As with most things, a one-size-fits-all approach won’t work and something that works for one council won’t necessarily work in another. This is why we’re calling on local authorities to work with us to create an environment in which small firms can grow and prosper and the areas they work in.”

This was posted in Bdaily's Members' News section by Tom Keighley .