New research from the Federation of Small Business (FSB) shows the significant impact small businesses and local procurement have on communities throughout Great Britain. According to a joint study by the FSB and the Centre for Local Economic Strategies, investments in small businesses from local authorities can have a big pay-off – up to £746 million, in fact.

The report, entitled ‘Local Procurement, making the most of small businesses, one year on’, showed that small businesses are of much greater benefit to local communities than large firms. According to the latest figures, small enterprises reinvest 58 per cent more of revenue from goods and services purchased by councils back into local communities. In total, small businesses generated £746 million more for regional economies, despite the fact that they received £500 million less from local authorities.

“For every £1 spent with a small or medium-sized business, 63p was re-spent in the local area, compared to 40p in every £1 spent with a larger business,” researchers wrote in the report.

In 2012, councils spent £8.7 billion on locally procured goods and services. The FSB says authorities could have generated up to £788 million more by increasing investment in regional businesses.

“Councils have billion pound procurement budgets at their disposal,” said local government minister Brandon Lewis. “They should be supporting their local economy by cutting back procurement red tape, like pre-qualification questions and unnecessary equality requirements, in order to allow small firms to bid more contracts.”

To achieve this, John Allan, national chairman of the Federation of Small Businesses, announced a call to action, asking “local authorities to work with their local FSB to create an environment in which small firms can grow and prosper as well as the areas they work in.”

By investing in SMEs and businesses in their area, local authorities can help communities across the UK achieve their full potential, says the report. Additionally, a more proactive approach to procurement could promote widespread economic growth, hence why experts from the FSB are urging councils to adopt a procurement strategy that recognises the benefits of procuring from small, local businesses.

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