Ground-breaking new Index reveals extent of local government spending with small
businesses

Local authorities have been urged to ‘Spend Small’ as a newly launched Index ranks councils on their procurement spending with small companies.

According to authoritative research, 78,128 small firms are doing business with English and Welsh councils, earning over £11.1bn in the past three years. However, this compares to a total of £9.9bn directed to just twenty large companies by councils over the same period.

‘Spend Small: the Local Authority Spend Index’, published by the Centre for Entrepreneurs think tank and open data company, Spend Network, aims to highlight the shortfall - and explain why council procurement from small firms is a fundamental step towards achieving local economic growth.

Centre for Entrepreneurs chairman and serial entrepreneur Luke Johnson said:
“One of the best ways that government can support small businesses is buying from them. Sadly, many entrepreneurs struggle to win business from government, finding the process to be complex, bureaucratic and tilted in favour of large incumbents.

Although central government has an explicit strategy to do more business with small firms, the same cannot be said for local authorities, so performance varies widely. Given the opportunity, small, entrepreneurial firms are proving they can cut costs and drive innovation in the public sector, while boosting their local economies.

The Index aims to highlight the best performing councils, encourage those further down the rankings to evaluate their performance, and overall make it easier for entrepreneurs to win business. It’s time for all areas of government to Spend Small.”

Wandsworth Council had the largest increase in small firm spending between 2011 and 2014 (+30.5%), while Nottingham City Council had the largest decrease in small firm spending (-36.4%). Four of the five councils with largest increases over the period are within London they are Greenwich (+25.56%), Croydon (+20.21%) and Newham (+17.14%).

Leader of Wandsworth Council, Cllr Govindia told us:
"Wandsworth has a long tradition of working in partnership with the private sector so that we can offer the best quality services at a price local people can afford. We were pioneers in the market testing of public services from the late 1970s and early 1980s and over the years this has helped us deliver not just the UK's lowest council tax bills but also one of the highest satisfaction ratings of any local authority in the country. Supporting small and medium sized local businesses and helping them to grow and prosper continues this long tradition and is a great boost for jobs, especially for our younger residents, and for the borough's economy as a whole."

Analysis by the Centre for Entrepreneurs and Spend Network finds that the amount of spending with small firms does not depend on the financial size of the council, its location, local earnings, political control or the rural/urban status. Rather, a council’s set of of priorities is the primary factor influencing spend with small firms, indicating that having a Spend Small policy and implementing it could be transformative.

The Centre for Entrepreneurs is calling upon the government to take on the Index and create an annual league table, highlighting the progress made by UK councils in procurement from small businesses.

Matt Smith, director of the Centre for Entrepreneurs, said:
“The Local Authority Spend Index provides the first real evaluation of councils’ spending with small firms. By using actual spend data and a consistent calculation, we have been able to reliably compare small firm spending between councils. While the performance of some councils should be celebrated, there is much more to do to ensure small, entrepreneur-led firms can win business from local government”.

Spend Network founder and CEO Ian Makgill, said:
“This is the first time that spending from so many councils has been brought into one place. Our analysis of over 42m transactions has shown significant variations in the amounts that different authorities are spending with small business. We hope that our data can be used to understand the benefits of spending small as well as clear actions to help all of government to spend small in the future”.

September 11, 2014