Where Are All The Small Businesses?

January 31, 2021
Procurement

While 2020 was an incredibly rocky road for many businesses globally, in public procurement it was SMEs in particular who lost out, both in terms of number of government contracts awarded to SMEs and the value of those contracts. Worse still, this appears to be a trend in public procurement outside of the effects of Covid, with SME spend and contract counts consistently decreasing since 2018.

Contract Value Comparison

YEAR SME NON SME
2018 £2,239,220,733 £64,850,231,727
2019 £1,051,043,928 £51,738,778,670
2020 £1,846,698,878 £71,939,424,264

From our analysis of UK Central Government on ContractsFinder, we’ve identified that value of business going to SMEs has decreased from £2.2 bn in 2018 to £1.8 bn in 2020. Meanwhile, for non-SMEs, business value has increased from £64.8 bn in 2018 to £71.9 bn in 2020.

Contract Difference

YEAR SME NON SME
2019-2018 dif -53.1% -20.2%
2020-2018 dif -17.5% 10.9%

This fluctuation represents a 17.5% reduction in value going to SMEs between 2018 and 2020. Non-SMEs however saw their business increase by almost 11%.

Percentage Difference

YEAR SME NON SME
2018 3.3% 96.7%
2019 2% 98%
2020 2.5% 97.5%

Despite UK  being filled with a rich selection of skilful, experienced and resourced SMEs, only a fraction of annual business in public procurement goes to them; just over 3% in 2018, a figure that has decreased to 2.5% in 2020.

When looking at contract counts across the same period, SMEs saw a reduction of contracts by nearly 19% between 2018 and 2020. Meanwhile, Non-SMEs contract counts fell slightly more: over 21%.

Contract Count Difference

YEAR SME NON SME
2019-2018 dif -11% -11.7%
2020-2018 dif -18.9% -21.1%

This means that the share of contract counts for SMEs has risen over the past two years but only by a fractional amount: 0.2%. Non SMEs still dominate the contract counts: at almost 92%.

Percentage Difference

YEAR SME NON SME
2018 8% 92%
2019 8.1% 91.9%
2020 8.2% 91.8%

In 2020, fewer companies were winning businesses, through the effects of the pandemic. The 2020 SME total contract count dropped almost 19% and overall value dropped to £1.8bn. This means that the average value per contract actually rose from £5.15m to £5.23m.

The trends are similar with non SMEs, with less companies winning contracts. However, for non SMEs, those that do win receive a lot more value in 2020. Average value per Non-SME rose from £12.9 million in 2017 to £18.2 million in 2020.

Let’s hope as we emerge from the Covid crisis, governments actively seek more SME fulfilment of government contracts. With 5.9 million SME’s in the UK accounting for three fifths of  employment and around half of turnover in the UK private sector, there are plenty of reasons to support them.

The scope of this analysis

We looked at ContractsFinder, a procurement portal for England which has tags for SMEs. Although we’d like to look beyond ContractsFinder to include a Europe-wide comparison, SME indicators are very poor or  non existent.

Even ContractsFinder’s SME indicators are not always applied and those that are are not perfect as the nature of its tagging means that a contract awarded to an SME and a large organisation will flag both organisations as SMEs. To tackle this, we have come up with our own solution that we have yet to see done elsewhere. We match winners with open data on companies and use reporting thresholds for accounts as a proxy small companies. We also augmented this data by doing additional manual and automated linking because SMEs can be above the reporting threshold and large organisations can fall below the reporting threshold.

If you’d like to discuss our work, our projects or data services, please get in touch.

Image by Sean Benesh

April 14, 2021

UK Government Procurement Under Pressure

Yesterday the FT published an article, £19bn of UK Covid-related contracts awarded without seeking rival bids. The report reviewed the value of...
April 14, 2021

Selling to procurement: No One Cares About Your Product

Selling to procurement professionals is something that most people find frustrating, mainly because they are highly resistant to direct sales. Why? Well,...
April 7, 2021

8 Reasons Why Procurement Doesn’t Need Blockchain.

Blockchain is fundamentally a database, but rather than a database where one item is allowed to replace another, each change to the...
March 25, 2021

Procurement Transparency Suffers Under Covid-19

Government publishing of procurement notices has fallen significantly following the global spread of Covid-19. The total number of tender notices published globally...
March 20, 2021

South Africa, Kenya lead the way on African transparency.

Both South Africa and Kenya lead the way in procurement transparency according to our data, South Africa and Kenya publish more tender...
March 16, 2021

Missing Data Is A Known Unknown

There is a famous quote about the fragility of knowledge by Donald Rumsfeld, the hawkish US Secretary of Defence during the Iraq...
March 4, 2021

NZ Government Pharmaceutical Procurement Review

The New Zealand Government is taking steps to improve its procurement of national medicine supply through a review process. The Pharmaceutical Management...
February 28, 2021

The Problem With Frameworks

-Ian Makgill In my last post, I covered off framework agreements, and the advantages of using them for both government and suppliers.In this...
February 28, 2021

Do Framework Agreements Have Value?

-Ian Makgill Framework agreements are like umbrella agreements, and are usually made with a group of providers to supply a set of...
February 28, 2021

NSW Aims To Reserve Procurement Budgets For SMEs

We're always pleased to see governments around the world improving their procurement processes, by broadening opportunities for all types of business to...
February 28, 2021

Creating Synergy Between Politics & Procurement.

The need for administrations to act at pace is often at odds with the processes and procedures needed for good procurement. If...
February 28, 2021

Canada Launches Green Procurement

We are always pleased to see governments taking steps towards better procurement practices. Recently, the Canadian Government took a step forward for...
February 28, 2021

Not All Data Is The Same: Rules For Data Integrity.

-Ian Mackill Not all data is the same. It might have come from the same source, but how it gets treated is...
February 4, 2021

Post Brexit Procurement – What Will Change?

With the Brexit transition period officially behind us, it's worth considering the potential impacts of Brexit on Government procurement into the future....
February 28, 2021

Where Next For Data Led Procurement in Europe? A Discussion.

The They Buy For You  Project (TBFY) concluded on 31 December 2020. To mark the occasion, we look back at three years...

Newsletter

Compelling research, insights and data directly into your inbox.

Recent media stories

Search