SMEs 'losing battle' for public sector work, says business group

Small and medium sized businesses (SMEs) are continuing to lose out on public sector contracts, despite recent Government initiatives, says the Federation of Small Businesses (FSB).

Responding to its 'Voice of Small Business' survey, which questioned more than 2,700 businesses in the UK, the FSB found that 40 per cent of businesses thought the tendering process to secure public contracts was too complex. 37 per cent also felt they were side-lined by public officials preferring the services offered by larger firms rather than smaller businesses' experience and ability.

The findings come despite the Government's recent launch of the Contracts Finder website, a list of potential public sector procurement projects worth £70 billion, to make it easier for SMEs to secure work. The site forms part of the Procurement Pledge which is aiming to increase the number of SME contracts from 6.5 per cent to 13.7 per cent by the end of the year.

According to the FSB, one in seven firms made a bid for public sector contract work in the last year, yet 41 per cent failed to secure any business.

Of those that had won contracts, only a quarter (27 per cent) said they had found the Contracts Finder website useful, while half of those (55 per cent) that had won, said they had relied on personal contacts and referrals.

John Walker, national chairman for the FSB, said: "The Government has made an effort to raise awareness in the public sector that Britain's entrepreneurs and small businesses are willing and able business partners."

"But clearly more must be done. While central government has raised its game, without a true culture change across the public sector as a whole the Government's initiatives will have little impact."

The FSB, whose comments echo those made by the British Chamber of Commerce last week, now wants to see better procurement for SMEs across the whole of the public sector, such as the NHS.

Other business groups meanwhile, have suggested that the Government use its Contract Finder website as a vehicle to stamp out late payment amongst businesses - an increasing cash-flow problem for SMEs - by refusing contracts to those who continue to pay invoices late.

The Forum of Private Business (FPB) senior policy advisor, Phil McCabe, said combining the Government's Prompt Payment initiative together with its public sector procurement process had potential to make a 'massive impact for very little effort'.

He said: "It would be extremely welcome if it were to ensure only those firms which pay their suppliers promptly are awarded these lucrative state contracts. It would send a clear message to big business that late payment is not acceptable and will not be tolerated by government. This is an amazing opportunity for it to lead by example and set the standard for the private sector to follow."