Research from the Federation of Small Businesses found that, in Scotland, authorities spent only 27% of their buying power in the local economy. This compared unfavourably with the rest of the UK where the average was 31%.
Yet spending locally leads to a wider economic boost, the report says. Every £1 spent by a council with a local small business creates an additional 63p of benefit to the local economy. When money is spent with large local firms, the wider economic return is only 40p.
Andy Wilcox, the FSB’s Scottish policy convenor, said: ‘Our report confirms what many of us intuitively believe; that local spending benefits the local economy.
‘While not underestimating the challenge that Scotland’s local authorities face, we hope that this report encourages them to realise that spending locally will boost their local economy.
‘We, of course, realise that councils can’t purchase on the basis of geography but they can ensure that they break contracts into appropriately sized lots, they can remove disproportionate terms and conditions and work with their local business community to understand the barriers to local firms’ success.’
Neil McInroy, chief executive of the Centre for Local Economic Strategies, which worked with the Federation of Small Businesses on the report, added that progressive public procurement was a way of ensuring that small businesses remained the ‘bedrock’of local economies.
‘This report highlights how we can accelerate these benefits and how a virtuous relationship between local authorities, local FSB and small businesses can be a winning combination for local economies.’
The study, called Local procurement, making the most of small businesses, on year on, is based on interviews with 177 local authorities, including 24 in Scotland.
