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Local Procurement Making the most of small business, one year on
The potential of local authority spending to support local economic development is being recognised in public procurement policy reforms in England, Scotland, Wales and Northern Ireland.

Research by the Centre for Local Economic Strategies for the FSB has found that:
  1. Responding authorities spent a combined £28.1 billion on procuring goods and services.
  2. Responding authorities collectively spent over £8.7 billion on procuring goods and services with local firms, generating nearly £4.5 billion of additional benefit for local economies; this is an additional 51p for every £1 spent.
  3. When the effects of local spend are broken down and analysed, every £1 spent by a participating local authority with local SMEs generated an additional 63p of benefit for their local economy, compared to just 40p generated by large local firms.
  4. The £4.1billion participating authorities spent with local SME firms generated £2.6 billion of additional economic benefit for local economies whereas the greater sum of £4.6 billion spent with large local firms generated only £1.86 billion for local economies.
  5. This means that small local firms generated over £746 million more benefit for local economies than large firms through their re-spend and through the re-spend of their suppliers. This is despite receiving over £524 million less than large local firms.
  6. This in turn suggests that small local firms generated over 58 per cent more economic benefit for local economies over two rounds of respending than large local firms did.
  7. If local authorities increased spend with local firms by five per cent it would increase collective spend in the local economy by over £1.4 billion.
  8. If local authorities increased spend with local firms by five per cent, and with SMEs by three per cent this would increase investment in local SMEs by over £964.6 million. 
  9. If local authorities increased spend with local firms by five per cent, and with SMEs by three per cent this would also increase the wider benefit brought to the local economy of large and SME firm re-spending from over £4.46 billion to over £5.25 billion; an increase of over £788 million without increasing the overall collective spend of £28.1 billion.
  10. Good practice in procurement is widespread with in excess of 90 per cent of local authorities taking action to assist local SMEs. Results of similar strength for process simplification, and the breaking of contracts into lots, further suggest that they are targeting priority areas for SMEs.
  11. Local authorities need to use contract clauses to ensure that their payment policies, and especially those on prompt payment, are passed on by tier one suppliers through their own supply chains.




 
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