The Cabinet Office has announced that for every £3 spent on government contracts, £1 should go to SMEs – those with 250 employees or less – by 2020. That would represent more than £70bn in new business for smaller firms each year.
Currently it’s estimated that 26% of central government spend goes to SMEs, worth £11.4bn. Cabinet Office minister Matt Hancock has said that if the government reached its target it would mean an extra £3bn a year going directly to SMEs or through the supply chain.
“This is such an amazing opportunity for the country’s diverse and innovative small businesses, and today I urge them to get stuck in. From computers to uniforms – there are so many opportunities for small businesses to work with us”
John Allan, the Federation of Small Businesses’ (FSB) National Chairman commented on the challenges to be faced in meeting the new target, saying:
“To meet it, the government will need to focus on robust monitoring and challenge of poor practices wherever they are found. The FSB will play its part, and will work with ministers on this important goal.”
The news follows an announcement earlier this year of the government improving the way it buys goods and services for the benefit of small businesses bidding for public sector contracts. These were:
- requiring the entire public sector supply chain to be paid within 30 days
- abolishing pre-qualification questionnaires for low value public sector contracts, making it simpler and quicker to buy
- requiring the public sector to publish its contracts in one place on Contracts Finder
Each government department and the Crown Commercial Service will now make sure that it meets the Cabinet Office target by setting out individual plans and targets for spending with SMEs over the next five years.