Government pledge to spend more with SMEs ‘loses momentum’

A new Public Accounts Committee report says that the Government’s commitment to spend more public money with small and medium-sized enterprises (SMEs) could be at risk without a new approach.

In 2010, as part of its manifesto, the Government set itself a target of making sure 25% of all procurement spending went to SMEs. In February 2015, the Government reported that it had surpassed its target a year early, with 26% of all procurement spending going to SMEs. By 2016, the reported figure was 27%, with £4.9 billion going directly to SMEs over 2014-15 and a further £7.3bn being spent on SMEs indirectly through supply chains.

The National Audit Office questioned the figures however. It said it was not possible to determine how much of the reported increase was due to the changes in government commitment and how much represented an overall increase in SME activity.

It also questioned the underlying data, claiming the Government had changed the size of suppliers it surveyed in order to determine the size of the indirect spend and that it could not be sure that direct spend had gone up either.

In August 2015 the target was raised from 25% to 33% by 2020. If achieved, this would certainly be good news for SMEs looking to grow and avoid the need for turnaround management. Government contracts can be extremely valuable and, according to the latest Bibby SME Confidence Tracker, public sector clients were the least likely to make late payments.

The Public Accounts Committee report suggested that it had not been persuaded that initiatives to remove barriers to SMEs had resulted in significantly greater competition for government business.

It said that larger suppliers continued to dominate and that it remained unclear whether smaller bidders were actually getting more government business than before.

The report called for a new approach, which would see the Cabinet Office and Crown Commercial Service (CCS) helping departments to identify the areas where SMEs could add most value. This, it said, could help departments to structure contracts and procurement procedures to enable SMEs to compete accordingly.

By Phil Smith

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