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24 April 2017

Feed local economies with procurement spending, says FSB

Despite there being 348,000 SMEs operating in Scotland – accounting for 99.3% of all businesses and providing an estimated 1.2 million jobs – local authorities (and the wider public sector) are still reluctant to shop local. In fact, your local council will likely spend less than a fifth of their procurement budget with local small and medium sized enterprises, according to official figures.

This matters because Scotland’s local authorities have a collective purchasing power of over £6 billion – more than £1000 of spending for every person in the country. And research shows that spending with small local businesses delivers more of an economic boost than purchasing elsewhere – resulting in more successful local places and likely reducing demand on council services.

Ahead of May’s council elections, the Federation of Small Businesses (FSB) wantsBe Smart - With Text town halls to pledge to change their spending habits. A modest annual two per cent increase in local spend would deliver boosts to local economies worth tens of millions. How should they make this happen?

Well, unsurprisingly, scale matters. Gigantic contracts are less likely to be met by local supply. So we’d ask councils – wherever practical – to break contracts up into the smallest possible lots.

Also, demanding huge insurance policies for smaller jobs isn’t sensible. Similarly, councils need to use the least administratively burdensome tendering processes wherever possible. More generally, excessive requirements to bid for contracts are likely only to be fulfilled by the largest of businesses with specialist departments.

On the other hand, firms bidding for public contracts probably need to accept substantially different processes and expectations from private work. Businesses need to build their capacity for state work in exchange for a reliable customer whose payment practices are mostly far better than their big business counterparts.

All of this won’t happen overnight, local authorities (and other parts of the public sector) need to build up local supply over time. We’d argue that councils need to use their economic development functions to prime local businesses to bid for public contracts – working in partnership with the public agencies charged to boost the Scottish economy.

Procurement - SpendUnfortunately – the data we have at the moment shows the volume of local buying is moving in the wrong direction. The impetus for a change in approach looks unlikely to come without political will, despite the passing of new legislation in Scotland. 

So, if you run a business, and you get a knock on the door or a firm handshake on the high street from a councillor to-be, you should ask them about their plans to boost local spending.

The billions which councils spend annually need to nourish our local economies, not fix a short-term problem. 


Stuart Mackinnon is External Affairs Manager for the FSB in Scotland 

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