ICAEW.com works better with JavaScript enabled.

Levelling Up: how SMEs can work with local authorities

Author: ICAEW Insights

Published: 19 Apr 2022

The government is urging local authorities to harness the social power of SMEs in their areas. Which measures will help procurement teams and small suppliers strike up winning relationships?

One of the biggest sea changes signalled in the government’s Levelling Up White Paper is an effort to spur local authorities to reform their procurement practices.

By taking a more welcoming approach to SMEs in their vicinity, the document notes, local procurement teams would “give more weight to bids that create jobs for communities, build back better from the pandemic and support the transition to net zero”.

The white paper explains that a switch of emphasis to those ‘social value’ factors would mean “that buyers will not consider price alone, but look at how public sector contracts can support local communities and disadvantaged groups”.

Highlighting an example of how that mutually beneficial ethos is already bearing fruit, the document cites the Birmingham 2022 Commonwealth Games – set to take place from 28 July to 8 August.

A key aspiration behind the Games is to award two-thirds of its supplier contracts to firms based in the West Midlands. In line with that mission, organisers have engaged three local firms to help meet the event’s social value objectives. Official legal adviser Gowling WLG is issuing pro bono advice to Games-linked charities and donating volunteer hours to hundreds of further beneficiaries. Host broadcaster Sunset and Vine has committed to delivering paid training placements in its industry for young people. And official IT services provider NVT Group will provide paid internships to people from the Birmingham area.

In the spirit of such ventures – and with an annual public procurement pot of £300bn up for grabs – the White Paper notes that the government will introduce legislation designed to “make it easier for small businesses and social enterprises across the country to bid for and win public contracts”.

Proactive edge

However, before that legislation arrives – and before they can think about unlocking social value – how can SMEs and local authority procurement teams form closer ties? What practical steps should they take to set about building bonds of trust?

Helena Young is project lead of the Startups Cities Index 2022: a league table of the best UK cities in which to start a business, from SME advice hub Startups. In her assessment, small and medium-sized firms are currently lacking a proactive edge for getting themselves noticed by local authorities.

“The government’s drive to prioritise small businesses is a step in the right direction,” she says. “But the truth is that many SMEs fall at the first hurdle by not seeking out potential public contracts.”

Signing up to the government’s Contracts Finder website means you’ll receive email alerts when relevant tenders are added, and will be able to jump quickly on an opportunity. For firms that operate in a specialist sector, local authorities tend to publish details directly on their website.

Young recommends: “Small firms that are lacking experience in the bidding process should work with third-party consultants. That expertise and support can help SMEs feel more confident about future application submissions.”

SMEs can also leverage their flexibility to compete with larger firms in the arena of Net Zero targets, she explains. “Large corporates typically need more time to adapt their business models for lower emissions – whereas smaller firms are usually better placed to implement sustainable practices and behavioural changes. Such agility is hugely attractive to local authorities that need to meet increasingly strict sustainability targets.”

Respectable standards

Bolstering their credentials, Young notes, is another positive step that small and medium firms can take. “Accredited SMEs appear much more trustworthy to local authority procurement teams,” she says. “Some contracts only accept bids from standards-compliant businesses. So, taking a standards-based approach is the best way for SMEs to optimise their supply chain management and create positive working relationships with larger partners.” 

Industry-specific bodies, such as the British Accreditation Council for education, can provide online support and expertise to small businesses looking to gain certain accreditation and satisfy tender requirements, she explains.

Collaborating with larger corporates can be another productive route into contract negotiations. “Plus, attending trade forums is a great way for SMEs to build brand recognition and nurture those types of long-term relationships.”

She adds: “Local authorities often have their own social-value boxes to tick when it comes to choosing suppliers. So, if you can, emphasise strong local ties – such as how much of your workforce, or how many of your business partners, are based within your local community.”

Local recognition

That said, it is Young’s stance that forming these relationships is something that both sides will have to work at. “The Levelling Up onus should not lie entirely on small business owners,” she says. “The government has laid the foundations for a more level playing field in procurement. Now local authorities must bridge the gap between policymakers and SMEs, and ensure that the latter are properly represented in contractual agreements – with open dialogues before, during, and after the contract stage.”

One senior figure who takes a similar view is John Pearce, CEO of Made in Britain, a trade association that licenses the official Made in Britain mark and works with almost 2,000 UK manufacturers – around 95% of which are SMEs. 

“Our research shows huge demand among British consumers (80%) and procurement professionals (90%) for purchasing more goods produced on home shores,” he says. “British manufacturing businesses should be recognised and rewarded with a degree of prioritisation by public sector buyers, procurement professionals and consumers – not just because they are manufacturing a product in Britain, but because their product is of high quality and they are running their businesses responsibly.”

Made in Britain is engaging with departments across Whitehall in the Transforming Public Procurement process. Pearce says it is vital for the British manufacturing sector that home-grown firms have as much access as possible to suitable opportunities. “Greater awareness and clarity around how SMEs can access opportunities with local authorities would be hugely beneficial for small British manufacturers.”

Recent articles

Levelling up: making it work

The Levelling Up agenda is hugely ambitious, incorporating everything from infrastructure to education and skills, private investment to public procurement. Many factors must align in order to make a real difference.

Aerial view of suburban residential streets in summer.

Recommended content

Insights Special
Three people in business attire walking up a staircase
Social mobility and inclusion

As organisations struggle to attract the talent they need, there is a business need to widen the talent pool.

Find out more
Insights Special
A container ship at sea
Trade: clean growth and tech

Clean growth and the application of major emerging technologies to existing sectors are two key characteristics of trade in 2022. Add to these levelling up supported by foreign direct investment, and there are exciting future prospects for business and the prosperity of communities globally.

Find out more
Map of UK
UK Business Confidence Monitor: regional

Quarterly analysis on each UK region covering growth, investment, and business confidence.