ODI Startups reveal scale of council spending with small companies for the first time - open data analysis shows spend as low as 4% of total budget

A new report, based on analysis and data from one ODI Startup, Spend Network and using data supplied by another, Open Corporates, has revealed significant variations in local council spending with small companies* in England and Wales.

Over three years between 2011 and 2014, councils spent £11bn with small businesses, within an overall spend of £89bn. However, this conceals wide differences, with some local authorities investing as much as a quarter of their overall budgets and others, as little as 4%.

The Spend Small report by the Centre of Entrepreneurs presents the first analysis of local authority spending with companies on a national scale, using open data.

Key findings

It ranks individual councils by the amount they spend with small businesses. Key findings of the analysis include:

  • Between 2011 and 2014, more than 78k small companies delivered contracts for local authorities with a total value of £11.1bn

  • In contrast, total spend with the "top twenty" companies was £9.9bn in the same period

  • Local authorities are making best use of small firms in sectors including social care, construction and business support. Very little spending takes place with small businesses in accounting, financial services and advertising

  • Spending with small firms is not influenced by political control, geographical spread or average earnings for the region. It is positively affected by explicit policies to boost procurement from SMEs

To carry out the analysis, the research team mapped 44m transactions from 150 councils in England and Wales to over 190,000 company records published by Open Corporates, another ODI Startup company.

Recommendations

The report makes several recommendations, including that:

  • Each council should publish a pipeline of contracts becoming available in the coming year

  • Government and the Local Government Association [LGA] should work with Spend Network and the ODI to develop a common framework for local authorities to report on SME spend

  • Every UK public body should publish spending over £500 rather than the current £25k minimum for some public bodies

Commenting on the work, Spend Network CEO, Ian Makgill said:

Our analysis, based on open data is the first insight into local government spending on a national scale and is a testament to the power of open data in action. We can't assume that all spending with small firms will equate to improved economic development but research has shown that small firms are a key source for job creation and economic growth. So we hope that this will be a useful contribution to small business success and economic growth across the UK.

The ODI’s Technical Director, Jeni Tennison said:

It is encouraging to see open data being used to shed new light on the way the public sector procures products and services from small businesses. It’s also good to see ODI Startups - which are, after all, UK small businesses built on open data - bringing new levels of insight to this subject.

Whilst today’s report reveals that there is still a lot of work to do, we are already seeing signs that the public sector is serious in its commitment to publishing and using more open data. ODUG and Release of Data Fund backed Local Government Open Data Incentive Scheme, for example, is promoting greater transparency using open data, as recommended in today’s report. And we are working on initiatives such as Open Contracting to help ensure that all businesses, whatever their size, have a fair chance of competing for contracts."


To read more from Ian Makgill on what today’s research means for small businesses click here.

For the CFE report, researchers used the audit exemption threshold set by Companies House to define a small business.