Small firms across England are set for a major boost as the government unveils new procurement powers allowing councils to reserve lower-value public contracts for local suppliers — a change expected to redirect more than £1 billion a year into local economies.
Under reforms announced today, councils, police forces and fire authorities will, for the first time, be able to restrict bidding on certain contracts to businesses based in their communities or elsewhere in the UK. Ministers say the move will unlock growth, create skilled jobs and simplify access to public sector work for small and medium-sized enterprises.
The change involves disapplying a long-standing clause in the Local Government Act 1988 that prevented local authorities from favouring local suppliers. It brings town halls in line with Whitehall departments, which already have greater flexibility to use procurement to deliver social and economic value.
Chris Ward, Parliamentary Secretary at the Cabinet Office, said the reforms would “put power back in the hands of our communities,” adding:
“We’re changing the rules that have held back councils from investing in local businesses that are the lifeblood of local economies.”
Alison McGovern, Minister of State for Local Government and Homelessness, said the ability to prioritise local firms marked “a huge step forward”:
“This will mean more money going to businesses that know their areas best and can invest in the communities they serve.”
The move forms part of a wider overhaul of the public procurement regime aimed at opening up government work to SMEs and cutting commercial red tape.
It follows the publication of February’s National Procurement Policy Statement, which emphasises that public spending should generate wider social and economic value, including supporting local employment and improving skills.
Over the summer, ministers also consulted on proposals to use everyday public sector spending to create more opportunities for small businesses and social enterprises while strengthening local supply chains.
The reforms were welcomed by small business representatives, who have long argued that the procurement system was skewed in favour of large contractors.
Tina McKenzie, Policy Chair of the Federation of Small Businesses, called the move “exactly the kind of practical reform we called for”:
“Small firms bring deep local knowledge and strong community ties. When the system clears unnecessary hurdles and lets them compete on fair terms, the whole community benefits.”
Cllr Dan Swords, chair of the LGA’s Public Service Reform and Innovation Committee, said councils would now have greater freedom to “keep more of what they spend in their local communities”:
“Local suppliers, SMEs and voluntary organisations will all benefit, helping us boost inclusive local and national economic growth.”
The government stresses that core principles of fair competition and value for money will remain in place, but officials believe the reforms will give local authorities the flexibility needed to support economic recovery and resilience at a grassroots level.
