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

LGR disruption offers long-term opportunity

By Caroline Compton-James | 16 April 2026

Councils understand the longterm benefits that reorganisation can unlock, and are also clear about what will enable them to navigate the transition effective...

BUSINESS

Winning the war on waste?

By David Blackman | 16 April 2026

Is Reform UK’s waste drive just a saloon bar dream or are there still genuine efficiencies to be gleaned in local government? David Blackman reports

BUSINESS

Local talent, local control, local savings

By Caroline Wheller | 09 April 2026

Caroline Wheller looks at the benefits of joint venture models in delivering services

BUSINESS

Reducing reliance on temporary housing

By Naisha Polaine | 26 March 2026

Councils are still placing record numbers into short-term housing, but local authorities like Barnet LBC are now attempting to take back some control, explai...