Central government spend with SMEs falls for the first time in years

Profile picture for user ddpreez By Derek du Preez July 18, 2018
The government’s central spend with SMEs - both directly and via its supply chain - has fallen from 26.1% in 2013/14 to 22.5% in 2016/17.

The British government’s ambitions to have 33% of its procurement spend going to SMEs by 2022 appear to be flailing, as its official latest spend figures for the year 2016/17 show a drop in overall spend for the first time in years.

Departments including the Department for Work and Pensions, Department of Health, the Cabinet Office and the Ministry of Defence all saw a drop in total spend with SMEs.

The figures detail both direct and indirect spend (which is via the supply chain and larger suppliers) - and both saw a drop compared to the previous year.

Coincidentally (or not) the Minister for Implementation, Oliver Dowden, last week announced that each government department has now been appointed a minister to champion public spending with small businesses.

To provide some context, in 2013/14 the total central government spend with SMEs stood at 26.1%.

It’s been a long running ambition, and a very vocal policy coming from the Cabinet Office and the Government Digital Service, that government departments should be spending more with smaller businesses, not only to introduce innovation, but also agility, and to support the local economy.

A number of mechanisms have been introduced to make this happen - including the G-Cloud and the Digital Outcomes and Specialists frameworks - as well as new legislation to make it easier for smaller businesses to do business with Whitehall. For example, everyone in the supply chain must comply with 30 day payment terms.

However, despite these moves direct spend this year fell from 11% in 2015/16 to 10.5% in 2016/17. And indirect spend fell from 13% to 12% for the same period.

Furthermore, I’m hearing that the government has used indirect spend figures to inflate the figures artificially - but more on that next week when I’ve got more information.

It’s likely to be a concern that Brexit (which is proving a drain on resources and will likely push departments towards larger suppliers for new systems) and the lack of drive coming out of the Cabinet Office and Government Digital Service in recent years will be having an impact - but those are purely speculation on my part.

Either way, not good news for the SME agenda.

SME spend data