Report: Northern Powerhouse still snubbing SME suppliers

FOI research reveals more than 50 per cent of councils are not honouring a government pledge to support smaller businesses when it comes to procurement

More than half of Northern Powerhouse councils are failing to back the government's pledge to spend £1 in every £3 with small businesses, particularly with their IT outsourcing activities.

This is according to figures compiled from a Freedom of Information (FOI) request from IT services aggregator Streamwire which contacted all 34 councils that make up the UK's Northern Powerhouse.

Of the respondents, 15 of the 28 that responded revealed they did not use any smaller suppliers, and 18 of them said they had no means of differentiating small businesses from large suppliers. Worryingly, the figures indicate that 86 per cent have no plans to increase their IT services allocation to SME suppliers, showing a significant disconnection between government policies and actual spending habits of local councils. Just three of those that responded spend more than a third of their budget on small suppliers.

Anne Stokes, CEO of Streamwire, said: "The key objective of the Northern Powerhouse was to establish the region as a beacon for 'doing things differently', strengthening the area as an economic hub and showcasing how other regions could adopt similar innovation and best practice in their communities.

"Councils can play a powerful role by using their budgets to procure more from SMEs, which are more than likely to be regional businesses. Unless local councils take up this mantle, the government's goal of building an economic stronghold in the North is surely going to be very difficult to achieve sustainably."

She added: "The results from our FOI survey show a worrying disconnect between what is encouraged at central level and what is happening on the ground. [SMEs] can add real value to the objectives and plans of the local communities they work in. These findings could be seen as indicative of a wider issue in local government procurement nationwide. With large suppliers generally being unable to offer the agile and cost-effective approaches that SMEs can provide, councils are likely over-spending on inflexible services. This is not only going to do harm to local small businesses across the UK, but also to British taxpayers."

Scott Fletcher, founder of Manchester-based ANS, said the problem was not as black and white as it seemed.

"Local councils may change systems every five to 15 years and only then do they look to renew contracts, and it takes a while for these things to happen and it is difficult for SMEs to engage with these organisations.

"Unless there are specific plans to encourage engagement with these SMEs, it is a lot of hope rather than actual delivery when it comes to getting smaller businesses engaged with the public sector. Unless you are on a specific framework contract and have a lot of people focusing on that area, it is not easy at all to get onto these tenders."

Fletcher said EU regulation also has a role in making the situation more complicated for SMEs due to every contract going out to European tender.

"This is too costly for SMEs to engage in, and unless this changes it is definitely excluding the 'S' from SME and a lot of the 'M' part as well."