Government cuts could foil SMB funding
Government plans to increase number of public sector contracts awarded to SMBs
Tola Sargeant: Financial pressure on public sector could hamper SMB plans
Plans to increase the number of public sector deals awarded to SMBs could be hampered by the government’s cost-saving agenda, channel onlookers have warned.
The government outlined measures this week to ensure that a quarter of all public sector contracts are awarded to small firms in the future.
They include the introduction of a standardised Pre-Qualification Questionnaire in December which will require government departments to publish details of contracts awarded to SMBs.
Departments will be expected to increase the number of contracts they give to smaller firms annually and remove barriers from their procurement processes that stop SMBs clinching deals.
Tola Sargeant, public sector research director at analyst TechMarketView, said the aim was admirable, but would be hard to achieve.
“There is massive pressure across the public sector to cut costs,” she said.
“That could have a big impact on the number of contracts and there will be a lot of competition for them.”
Instead, Sargeant said SMBs should concentrate on winning business in public sector areas where procurement has been decentralised, such as health and education.
“It leads to a natural fragmentation of the market and smaller contracts, for which SMBs are better resourced to bid,” she explained.
As part of its SMB reforms, the government has also announced plans to extend the Enterprise Finance Guarantee (EFG) scheme by four years. The move is expected to free up £2bn in funding to small firms that lack a credit history or collateral.
Duane Jackson, chief executive of cloud accounting software vendor KashFlo w, said he would like to see one of the major banks throw its weight behind EFG.
“Many banks seem reluctant to use the scheme because of all the paperwork,” he said. “They could champion it and acknowledge how difficult it is for small firms to raise finance.”