Spend Network & Centre for Entrepreneurs use OpenCorporates data to reveal UK Councils spend as little as 4% with small companies

A report by Spend Network & think tank Centre for Entrepreneurs used OpenCorporates data to reveal that average spend by local councils in UK remains low. The research involved mapping 44 million transactions from 150 councils in England and Wales to over 190,000 company records published by OpenCorporates.

According to the Spend Small: the Local Authority Spend Index’ report, 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.

The Top 20 firms included companies such as Serco, IBM, Morgan Sindall, Capita Business Services, Kier MG Limited and Willmott Dixon Construction Limited.

Monmouthshire County Council is the best performing in the Index, with 25.6% of company spend going directly to small firms. Barnsley Metropolitan Council is the lowest performing with just 4.2% going to small firms. 

Wandsworth Council had the largest increase in small firm spending between 2011 and 2014 (+30.5%), while Nottinghamshire 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.

The report shows that the proportion of local spending with small firms does not depend on the size of the council budget, location, local earnings, political control or the rural/urban status. Priorities and policies set by the Council was found to be the the primary factor influencing spend with small firms.

This is troubling news because council procurement from small firms is a fundamental step towards achieving local economic growth which is why we join the The Centre for Entrepreneurs & Spend Network in 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.

Recommendations of Spend Small report

The report makes several recommendations, including that:

  • Each council should publish a pipeline of contracts becoming available in the coming year
  • Government and the Local Government Association [LGA] should work with Spend Network and the ODI to develop a common framework for local authorities to report on SME spend
  • Every UK public body should publish any spending over £500 rather than the current £25k minimum for some public bodies

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”.

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.”

OpenCorporates Co-founder & CEO Chris Taggart said, “This is an excellent report, and shows the power of open data to add insight, and increase understanding of the complex world of government finance. That fact that it has been powered by two of the most innovative open data companies in the world, both SMEs, just strengthens the case for government to improve services and efficiencies using this sector.”

You can read the full report here.

Press Mentions

Ditch your ‘cosy relationships’ with big business and buy small, local authorities told – The Telegraph
Small traders lose out in battle for council business – The Times
Councils urged to ‘spend small’ as large firms ‘dominate’ government spending – Business Zone