In 2023, small and medium-sized enterprises (SMEs) secured just 20% of direct public sector procurement spending, amounting to £39.7 billion. This figure, consistent with 2022 and slightly above the 19% pre-pandemic level in 2019, highlights the modest progress in SME participation despite government efforts.

Although the proportion of contracts awarded to SMEs has remained stagnant over the past four years, the value of these contracts has risen from £25bn in 2019 to £39.7bn in 2023. The total government procurement expenditure was £194.8bn last year, with overall spending on external suppliers across all sectors nearing £300bn, reducing the SME share even further.

Local government bodies were the biggest contributors, awarding 34% of their procurement spend, totalling £24.1bn, to SMEs. In contrast, the central government allocated just 11% of its procurement budget, equating to £5.8bn. The NHS spent £8bn, or 20% of its external procurement budget, on SME suppliers.

Effective from 28 October, the Procurement Act aims to address barriers faced by SMEs in public procurement. It will introduce a simpler, more flexible regime, removing certain insurance requirements that hinder SME participation. The Act will also allow public sector bodies to consider factors like supplier location and social value, potentially benefiting local businesses and communities.

Despite these measures, the average SME contract in 2023 was valued at just £32,000, with only a 20% increase in the number of SME suppliers since 2018.

Get in touch to discuss your business.