HR & Management

Local authorities and housing associations are being urged to increase spending with SMEs

3 min read

27 August 2015

Local authorities and housing associations are being urged to ramp up their spending with small businesses.

The Federation of Master Builders (FMB) – the trade association for the building industry – said the government’s declaration that every £1 in £3 is spent with small businesses “only applies to central government contracts”.

Sarah McMonagle, head of external affairs at the FMB, said: “We want to see an increase in spend with small and micro firms across the board and by every public sector body. In many parts of the country, it is still the case that small firms are all too often squeezed out by larger competitors when bidding for public sector work.”

She added: “There are lots of good reasons why the wider public sector should spend as much as possible with small firms. In particular, using construction SMEs has been proven to provide real local economic and environmental benefits. SMEs employ local people, meaning that the money spent is likely to go to local suppliers and remain within the local economy.”

It was suggested that in the construction sector two thirds of apprentices are trained by micro firms. This means that spending more with these businesses could help towards the government’s target of creating three million new apprenticeships by 2020. 

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However, the FMB is of the belief that there is an even more ambitious target the government could aim for.

“Some local authorities and housing associations are better at engaging with SMEs than others, but we’re urging all public sector clients to set a target for increasing the proportion they spend with SMEs,” she urged. “Some may already be spending £1 in every £3 but then they should be working towards spending £2 in every £3.

“One way the wider public sector can boost engagement in public procurement by small firms is to ensure they are implementing the EU Public Procurement Directive which was brought in earlier this year. The Directive states that public sector clients must break down their contracts into small lots and this makes public contracts much more appealing to small businesses – especially in construction where forming part of the supply chain can be particularly problematic due to late payment.”