For every £1 spent by local authorities on procuring goods and services from local firms, 51p is generated in additional benefit for local economies, according to new research from the Federation of Small Businesses (FSB).

The Local Procurement, making the most of small businesses, one year on report found that small local firms generated £746m more for the local economy than large local businesses.

The report calls on local authorities to use procurement to help boost the local economy. It said that if local authorities increased their send with local firms by 5% and small firms by 3%, this would increase re-spending in the local economy by over £788m.

Local government minister, Brandon Lewis, said: ‘Councils have billion pound procurement budgets at their disposal and they should be supporting their local economy by cutting back procurement red tape, like Pre-Qualification Questions and unnecessary equality requirements, in order to allow small firms to bid for more contracts. I'd like to see every council increase what they are investing in their own communities so they help it grow and prosper.'

The survey also found that local authorities were making progress on how to interpret EU procurement rules. The number of authorities adopting different processes for below EU threshold tenders has increased from 74% last year, up to 83%.

Of those surveyed, 86% break contracts into lots, with 96% saying they have simplified or standardised their tender process in the past year. Mr Lewis confirmed the Government would be taking forward the recommendations made in Lord Young's Growing Your Business report, which aims to create a ‘single market' across the public sector.

The survey also found that while 95% of local authorities have policies in place for the payment of suppliers, only 39% ask main contractors to pass on their payment terms. The FSB ‘strongly encourages' local authorities to include prompt payment in top tier suppliers' contracts.