Small businesses throughout the UK will have a greater chance of working on government contracts, with a third of national spending being used with SMEs by 2020.
Matt Hancock, minister for the Cabinet Office, intends to increase small business spends during the next five years.
Between 2013 and 2014, the government worked with SMEs using £11.4 billion worth of investment, equal to 26 per cent of the central government’s budget.
The future of SME spending
Hancock has big plans for the future, intending to spend an extra £3 billion a year by 2020, increasing government spending with SMEs by a third.
This means that for every £3 the government spends, £1 of it will be with small businesses.
The Cabinet Office minister has set financial targets for each government department and the Crown Commercial Service, ensuring that his SME spending goal is reached.
Hancock feels that his plans represent an ‘‘amazing opportunity’’ for SMEs nationwide.
‘‘From computers to uniforms – there are so many opportunities for small businesses to work with us, and I want to see more of them providing value for money for the taxpayer and benefiting from our spending.’’
The news has already been met with positivity from the small business community.
John Allan, national chairman for the Federation of Small Businesses has expressed his delight at the government’s willingness to help small firms, and has already given Hancock advice on how to reach his targets.
‘‘The government has much to gain from opening up public procurement to smaller businesses and we welcome the government’s commitment to achieve this ambitious target,’’ states Allen.
‘‘To meet it, the government will need to focus on robust monitoring and challenge of poor practices wherever they are found. The FSB will play its part, and will work with ministers on this important goal.’’
Committed to helping SMEs
The government has already put a number of measures in place to support small and microbusinesses during tough economic times.
In July, plans to appoint a small business commissioner were revealed to the public, with a key responsibility being to tackle the late payments problem that has been plaguing SMEs for many months.
The government estimates that SMEs are owed £26bn in late payments, and they are spending on average £10.8bn a year in an attempt to recover overdue payments.
Another way in which the government is helping SMEs recuperate their money is buying lifting anti-invoice restrictions imposed on small companies.
Restrictive clauses that ban the use of invoice finance have prevented SMEs from gaining much needed funds.
Invoice finance is quickly becoming a popular cash injection method for SMEs. By selling their invoices to payment companies, they are able to work around the 30-day processing wait that has been putting SMEs out of business.
Invoice finance has become so popular, that the Asset Based Finance Association has found that nearly 45,000 businesses receive over £19bn worth of funding via invoice finance at any given time.