SMEs get a procurement leg up

Just 23% of SMEs have worked for the public sector over the past 12 months. But the government has set a target of awarding a third of all procurement spending to SMEs by 2020.

Public sector bodies, including central government, spend more than £250bn a year on procurement. This should be a potentially lucrative source of business for small and medium-sized enterprises (SMEs). Yet the Federation of Small Business has found that despite the promises of successive governments just 23% of SMEs have worked for the public sector over the past 12 months, down from 25% in 2014, the last time this research was conducted. The number of SMEs interested in bidding for public sector work is also falling, with just 10% of firms showing an interest, compared to 14% three years ago.

This suggests that the government will struggle to hit its target of awarding a third of all procurement spending to SMEs by 2020. The figure currently stands at around 27%, although this includes work that ends up with SMEs as part of a supply chain managed by a larger public sector contractor. Contracts awarded direct to SMEs account for less than 10% of public sector spending.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.