Government spends £12.1 billion with small businesses

Published:  10 December, 2015

The government has spent 27.1% of its total central government buying with small businesses in the last financial year, according to official statistics.

Of this, 10.9% occurred directly and 16.2% through the supply chain, with figures exceeding the target set in the last Parliament for government to spend 25% of the total central government procurement with small businesses by 2015.

The government said it is now in a good position to reach its new target for a third of central government buying to be with small businesses by 2020, which it said will mean an extra 3 billion per year going to small firms directly or through the supply chain, compared with the spending levels in 2013-14.

The government is also working to speed up the payment process for small businesses through the Prompt Payment Code, which aims to permit businesses, charities and voluntary organisations to compete for public sector contracts. Some 17 of the government's 33 strategic suppliers have now signed up to the Code, thereby promising to pay their suppliers promptly.

Matt Hancock, Minister for the Cabinet Office and paymaster general, said: "Small businesses are the lifeblood of the UK economy. I want to turbocharge our ambitions for small business and have £1 in every £3 of government spend going to small businesses by 2020. I look forward to seeing even more of our big suppliers sign up to the Prompt Payment Code and help the small businesses in their supply chain."

John Thompson, chief executive at the Association of Plumbing & Heating Contractors, said: "We welcome the news that government procurement is being opened up to small businesses and that action is being taken to increase the efficiency of the payment process. However, where prompt payment and payment protection of the small business are concerned there is certainly still further to go, in particular through the use of Project Bank Accounts (PBAs) on all projects and the removal of draconian retention payment arrangements."