Councils in England buy approximately £62 billion of goods and services every year – this represents nearly half of all local government expenditure. With such a substantial sum being spent on a wide range of products and services, councils’ procurement has the power to benefit economic development and regeneration throughout surrounding areas.
As a result, the Local Government Association (LGA) launched a procurement pledge in 2012 to get the best value for taxpayers and yield the best result for communities. This official commitment favours local goods and services, and increased procurement from small and medium-sized enterprises (SMEs), instead of big business pipelines.
The benefits of such a programme have recently been proven in a collaborative study by Columbia Institute, LOCO BC and the ISIS Research Centre at the UBC Saunder School of Business. Their research suggests that buying locally yields greater results thansourcing from large, multinational suppliers.
The study focused on procurement at Mills Basics, a local office supply business. Whenever the company chose to buy locally, approximately 33.1 per cent of its revenue was pumped back directly back into the local community. In contrast, only 16.6 per cent of revenue was injected into the local economy when Mills Basics opted for multinational suppliers.
As a result, locally sourced products and services provided between 77 to 100 per cent more benefit to the local economy. Researchers also concluded that almost twice as many jobs were created throughout the region per dollar of revenue, whenever Mills Basics chose local suppliers over international companies.
Managing director at the Isis Research Centre, Joanna Buczkowska, added: “When local purchasing dollars are re-circulated in the local economy they create good jobs and build local business. It is a very meaningful way of growing local economies while supporting our communities.”
The Scottish government has published similar findings in their 2008 report, entitled Community Benefits in Public Procurement. In the case study, it was found that locally contracted work aided community regeneration efforts, promoted investment and improved the region’s economy by significantly reducing unemployment levels.