The UK’s public procurement sector is starting to address the lack of contracts awarded to small and medium-sized enterprises (SMEs). However, a new report from the British Chambers of Commerce (BCC) and data provider Tussell argues that progress is too slow, causing small businesses in the UK to miss out on the majority of almost £200 billion in annual spending.
The 2024 BCC’s SME Procurement Tracker
According to the BCC’s SME Procurement Tracker for 2024, only 20% of direct procurement spend from the wider public sector (including the central government) went to SMEs in 2023.
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 accounted for about a fifth of overall spending last year. The figure remained unchanged compared with 2022 (20%) and only increased slightly over 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 leads the way in working with SMEs
Local governments 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 spending with SMEs varies across different sectors. The Health and Social Care sector earned £11.9bn in direct public sector revenue in 2023, with this accounting 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 the 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.”
