Tussell 2025 Local Government Report – Behind the Numbers

Across the 2024 calendar year, local and sub-central government authorities spent around £81 billion on procurement of goods, works and services. Comprising nearly 3% of the UK’s GDP, the local government market is a huge opportunity – particularly for small- and medium-sized businesses – to grow their business in partnership with the public sector.

Public sector market insight experts Tussell have produced a detailed report summarising key findings, highest performing authorities and what small- and medium-sized businesses and VCSEs should take away from the figures.

Key findings from Tussell’s local government report

As summarised in the relevant section, the primary themes from the data comprise the following:

Local government’s role in supporting regional economies and businesses

Local and sub-central authorities spent over £35 billion on procurement with local businesses and organisations, with greater spend in terms of both volume and percentages in comparison to central government authorities.

As such, local SMEs and third sector organisations should consider local authorities as a key client to expand their contract portfolio and increase revenue.

North West outpacing other regions in local spend

On Tussell’s ‘league table’, the region spending the most with local/VCSE organisations is the North West, with nearly 70% of councils performing above average in comparison to other regions in terms of both local and SME/VCSE spend.

The South West was another strong performer, with over 75% of authorities ranking in the top half of local supplier spend.

VCSEs losing share of procurement spend

In terms of cash spend, procurement spend with Voluntary, Community and Social Enterprises (VCSEs) and third-sector organisations is rising – however, overall spending is outpacing this increase, meaning their market share is shrinking in real terms.

This raises concerns about the potential viability and future role of relevant organisations within the local government’s supply chain, in addition to introducing questions about who is acquiring contracts in place of VCSEs.

Highest-performing local authorities

Drawn from Tussell’s data, local government councils and other authorities spent nearly half of their total procurement budget with local businesses – some £28.8 billion with SMEs, and £8.7 billion with VCSEs during the 2024 calendar year.

The authorities listed below are just a selection of those with a spend with local businesses (defined as suppliers headquartered in the same region as the buyer) exceeding 70%:

In contrast to this, central government authorities (such as the Ministry of Defence and Department for Education) spent just 11% of their total procurement spend with SMEs. This has been a long-running theme in central government procurement, and something PPN 001 and the National Procurement Policy Statement are attempting to rectify.

SME and VCSE spend through tender opportunities

Overall, local authorities spend over four times more with VCSEs than central government authorities, positioning them as a critical component of regional growth and a balanced economy.

However, 28% of councils have significant room to improve spend with VCSEs, SMEs and locally-based suppliers. This suggests there are still potential growth areas for local, small- and medium-sized businesses and VCSEs, and the market is not yet oversaturated.

As part of the National Procurement Policy Statement issued this year, the current government is looking to ‘kickstart economic growth through procurement’ by integrating a larger proportion of SMEs and VCSEs into existing supply chains – as well as reducing barriers for entry to public sector opportunities.

Executive Compass’s thoughts and recommendations

As with previous reports from Tussell we have reviewed, we agree with their concluding remarks regarding local authorities being a ‘critical driver of economic value and regional growth’ and that larger councils spend less with SMEs is not true – hopefully, dispelling the notion that devolution will result in smaller businesses losing out.

In addition to this, we also recommend:

• SMEs perform due diligence on local authorities within their delivery region and whether there are upcoming opportunities in their industry or sector – performing key pre-bid activity to maximise available time within the submission window
• Local authorities consider reserving or prioritising VCSEs for certain contracts where it is appropriate, building supplier capacity and national capability in line with the latest Public Procurement Consultation
• Underperforming councils can learn from high-performing authorities on how to better integrate SMEs and VCSEs in their supply chain – for instance, more frequent adoption of lots or frameworks.

To find out more on how we can support you with local government tender opportunities, book a free, 30-minute consultation or send across a live contract opportunity for a no-obligation quotation at info@executivecompass.co.uk or via telephone 0800 612 5563.