Title

BUSINESS

Public sector contracts are vital for boosting local economies

For at least the last seven years ministers have been trumpeting the role of small businesses as beneficiaries of public sector contracts, along with the big multinationals. Not for the first time, however, ministerial exhortations turn out to be unsupported by facts.

For at least the last seven years ministers have been trumpeting the role of small businesses as beneficiaries of public sector contracts, along with the big multinationals. Not for the first time, however, ministerial exhortations turn out to be unsupported by facts.

The Cabinet Office last week issued a report showing that most government departments are nowhere near hitting the target of ensuring that by 2020 a third of procurement budgets are spent on small businesses (SMEs). The target date has now been put back to 2022.

One of the worst performers is the Cabinet Office itself with just 19% of its procurement budget spent on SMEs. Departments with responsibility for overseeing local services fare little better; the Department for Communities and Local Government spent 21.2% of its budget on SMEs in 2015/16 and the Department of Health 22%. One former Labour minister accused Whitehall of being too focused on larger providers and, as a result, undermining economic growth.

The private sector is heavily dependent on public sector contracts. A decade ago the DeAnne Julius report estimated the value of the public sector market as 6% of GDP, with health and social care being among the largest sectors. The report also concluded that in the future it would require experienced public sector commissioners ‘who are adept at long-term market development'.

This means ensuring an active market which is not dominated by an oligarchy of multinationals, though, as we have seen recently, one or two of these have become seriously unstuck over their public sector contracts.

Local government, in particular, will always need the services of private and voluntary sector providers and needs a vibrant market to ensure competition and choice.

Furthermore, with 100% business rates retention and the Industrial Strategy looming, the role of Whitehall nationally and local government locally in ensuring that smaller firms benefit from public sector contracts – and help boost local economies as a result – becomes even more vital.

BUSINESS

Nobody ever voted for a map

By Ben Page | 17 August 2026

Rewiring the State offers the most significant shift in local government for a generation, but there is still a lot that has been left unwritten, says Ben Page.

BUSINESS

The case for fundamental reform of adult social care

By Alison Whiteley | 14 August 2026

Alison Whiteley explains why councils must help shape a more preventative, person-centred future for adult social care, and she says London is ready to work ...

BUSINESS

Tourism costs

By Ann McGauran | 12 August 2026

Bath is a tourism destination delivering an ambitious programme of commercial regeneration. But it is calling for more support from government above and beyo...

BUSINESS

Untangling the wires to progress

By Martin Ford | 12 August 2026

The Government has finally unveiled it proposals to ‘rewire the state’ and devolve powers to regional and local levels. Martin Ford delves into the document.