Capita received more than all SMEs combined for providing back office services to local authorities over the last three years, a study has shown.
The UK-based multinational is by far the biggest IT provider to local government, earning £232 million between April 2011 and March 2014.
In comparison, SMEs earned a total of £221 million providing support services to councils over that period, despite business support services being dubbed the third ‘top sector’ for small firms in a report by think tank Centre for Entrepreneurs (CfE).
A report by TechMarketView published last month found that Capita is now the biggest IT provider to the UK public sector, reporting an 11 percent increase in sector revenue to £1.6 billion last year.
The discrepancy shows the scale of the challenge facing those hoping to increase spending with SMEs across the public sector.
The report found that councils in England and Wales spend an average 12.5 percent of their procurement budgets with SMEs.
This is more than the 10.5 percent central government spends directly with SMEs, and half the 25 percent goal that Whitehall aims to spend with SMEs directly or indirectly via subcontracting, by 2015.
Local authorities spent £11 billion with 78,128 SMEs, out of a total of £89 billion spent with all firms during the period sampled from April 2011 to March 2014.
Monmouthshire biggest SME spender
The analysis, which was conducted by open data firm Spend Network on behalf of CfE, found that Monmouthshire County Council was the biggest local authority spender with SMEs (26 percent), while Barnsley Council spent the least (4.2 percent).
Monmouthshire was followed by Isles of Scilly council on 25 percent, the Royal Borough of Windsor and Maidenhead on 21.8 percent, Stoke-On-Trent City Council on 21.7 percent and Vale Of Glamorgan County Council on 21.5 percent.
SME spend varies among top five largest councils
The largest council by population, Birmingham City Council, spent 19 percent of its budget with SMEs, while the second biggest, Leeds, gave almost half that proportion – 10 percent - to smaller firms.
Sheffield City Council, the third largest council, was the second worst performer in the list, awarding just 4.3 percent of its budget to SMEs. Cornwall Unitary Authority spent 11 percent with SMEs and Bradford City Council spent 13 percent.
‘Spend small’ policy could be ‘transformative’
Analysis by CfE and Spend Network found that the amount spent with small firms does not depend on a council’s location, size, earnings or political control. Instead they concluded that a council’s set of priorities is the primary factor influencing SME spending.
They said that this indicates “that having a ‘spend small’ policy and implementing it could be transformative” for councils.
The CfE has called for the government to take on the index and turn it into an annual league table, so progress made by UK councils in procuring from SMEs can be easily tracked.
Centre for Entrepreneurs’ chairman Luke Johnson said: “Given the opportunity, small, entrepreneurial firms are proving they can cut costs and drive innovation in the public sector, while boosting their local economies.
"The Index aims to highlight the best performing councils, encourage those further down the rankings to evaluate their performance, and overall make it easier for entrepreneurs to win business.”
The think tank issued a set of recommendations, for example that every local authority should have an SME procurement champion and explicit policies and programmes to boost spending with SMEs.
They also suggested that councils should publish a pipeline of contracts for the next year and publish all spending over £500 rather than the current £25,000 minimum.