Small and Medium Enterprises (SMEs) are key innovators and
vital for economic growth.
The Government is the UK’s biggest single consumer – the
biggest purchaser of goods and services - but it is failing to ensure that
public procurement is being used effectively to support SMEs across the
country.
In February 2011, David Cameron and Cabinet Office Minister
Francis Maude outlined Government procurement reforms. They both pledged to
ensure that “25% of all government contracts are awarded to small
and medium-sized enterprises”. Of course, this promise got good
headlines and supportive editorials in the media. However, like various other
pledges, the Government has since dropped this as a target, and
downgraded it to an “aspiration”. Not surprisingly, there has been little media
comment about this.
At the beginning of March, the Cabinet Office published full
year figures for procurement spend with SMEs across central government
departments. The figures show that the percentage of procurement spend
with SMEs has actually decreased in the majority of government departments.
SMEs are very dependent upon good cash-flow. In 2011, the
Government promised to pay all SME invoices within ten days, and that
subcontractors would get paid at least within 30 days, and that it would
"name and shame" large suppliers who fail to pay SMEs on time.
But the latest Forum of Private Business research shows that
18 per cent of small businesses are still being paid late by the public
sector. And the survey found that nine per cent more members are
reporting late payments from the government departments and agencies compared
to 2009. Even worse, despite government promises of a
concentrated effort to improve payment performance by major contractors, the
latest figures show the opposite. The big outsourcers are
getting worse, putting small companies that they subcontract the work to under
enormous financial pressure.
So, despite all the rhetoric, the reality is that this
government’s failure to procure from, and its late payment to, SMEs is
threatening the survival of many small business and the country’s economic
performance as a whole.
