BCC finds Government failing SME procurement spend targets

A report from the British Chambers of Commerce (BCC) has found that only 20% of Government spend on public sector procurement in 2021 went to small and medium-sized enterprises (SMEs).

The data pertaining to the report was carried out by Tussell, an organisation which provides information on government contracts and spending.

The BCC’s SME Procurement Tracker has revealed that while the value of published public sector procurement spending with SMEs has increased, the actual proportion of total Government money awarded directly to SMEs has stagnated over the past five years.

The tracker is said to be the UK’s most comprehensive source of data on SME procurement. 

Based on procurement expenditure data published by public bodies, the value of reported public procurement spending in the UK increased significantly over the period from 2016-2021.

The amount spent on third-party goods, services and works, more than doubled during this time, increasing from £80bn in 2016 to £181bn in 2021.

The total value of direct public spending with SMEs in 2021 has significantly increased on previous years, nearly doubling from £20bn in 2016 to £38bn in 2021, when just over 105,000 SMEs invoiced the wider public sector directly for a median annual amount of £32,000.

But the picture is not as straightforward as it seems, because despite this apparent rise in spend, SMEs are now receiving a relatively smaller amount of reported direct Government procurement spending than they were five years ago. 

25% of public sector procurement spending was awarded directly to SMEs in 2016, but by 2021 this figure had dropped to 21%.

This rate of investment is behind the central Government’s target of 33% by the year 2022; a target which also includes indirect spend with SMEs via the supply chain - which is admittedly difficult to measure.

The Director of Policy and Public Affairs at the BCC, Alex Veitch, said: “SMEs have traditionally struggled to access government business and have often found bidding for public sector contracts prohibitively bureaucratic, time-consuming, and expensive.

“While gradual improvements have been made in recent years, our tracker shows that further change is still required to unlock the public sector’s access to SMEs’ innovation and creativity.

“It is disheartening to see that as the level of public sector procurement spending grew over the past few years, the proportion of spending awarded directly to SMEs did not.

“We welcome the Government’s Procurement Bill which we hope will create a simpler, more flexible system which should accelerate Government spending with SMEs.

“However, businesses will not see the benefit of this until 2023. If Central Government is to meet its target of spending one in every three pounds with small businesses by 2022, serious consideration must be given to what steps can be taken in the short term to open up the public sector market to SMEs.”

The Government’s Procurement Bill’s overarching aim is to: ‘speed up and simplify our procurement processes, place value for money at their heart, generate social value and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery’.