Research from the Federation of Small Businesses (FSB) shows that 58 per cent more of the money spent by local authorities with small firms is re-spent in the local economy compared to that spent with large businesses in the area.
In an exclusive report the FSB and the Centre for Local Economic Strategies surveyed local authorities across the UK and found that in the last year they spent a total of £8.7 billion buying goods and services in their local area. The findings highlight how doing business locally is better value for money as small local firms generated £746 million more for the local economy compared to large local businesses – even though more than £500 million less was spent with them. The research shows that for every £1 spent with a small or medium-sized business (SME) 63p was re-spent in the local area compared to 40p in every £1 spent with a larger business.
The FSB wants to see more local authorities using businesses in their areas to help boost economic growth. The business group believes that if each authority had spent an additional five per cent of their budget locally and committed just three per cent more of that to small local firms, an additional £788 million could have been generated for local economies.
The FSB’s report, Local Procurement, making the most of small businesses, one year on, shows good practice across many local authorities. Neil Eames, Development Manager for the FSB Wessex Region, said: ‘This report shows the power and strength of small firms to create jobs and growth in the local economy if they are given the help to do so. With budgets being cut there seems to be an increasing realisation that spending more locally will benefit the local economy. The evidence speaks for itself. Spending locally invests in jobs and growth for the area. Engagement with small firms is essential. While our members do win contracts, many are still deterred by the process. The FSB is calling on our local councils to work together to create an environment in which small firms can grow and prosper.