SMEs in Public Procurement

37. United Kingdom

37.1. SMEs in the national economy

At the start of 2015, there were around 5.4 million SMEs in the United Kingdom, of which 1.31 million were employer businesses. Of these employer businesses, 99.5% were SMEs with fewer than 250 employees. These SMEs employed 52% of the total UK private sector workforce. Micro-enterprises (fewer than 10 employees) account for 82% of employer businesses. Employer SMEs had a turnover of GBP 1.5 billion, accounting for 44% of total private sector turnover.

Table ‎37.1. Distribution of firms in the United Kingdom, 2015.

(By firm size, percentage of all firms)

Firm size (employees)	Number	%
All employers	1,311,865	100
SME (1-249)	1 304 900	99.5
Micro (1-9)	1 068 815	81.5
Small (10-49)	203 525	15.5
Medium (50-249)	32 560	2.5
Large (250+)	6 965	0.5

Source: (OECD, 2017[1]).

37.2. National policy framework to support SMEs in public procurement

The UK Government has a commitment that 33% of central government procurement spend will go to SMEs by 2022. That target encompasses both direct spend and that through the supply chain. Previously, the central government had a target of 25% by 2015, which has been achieved. With the central government target in place, each central government and their agencies have their own plan for how it will encourage the use of SMEs in its buying.

Public Contract Regulation 2015 includes provisions to facilitate SMEs’ access to public procurement opportunities. Additional measures and policies, such as policy on prompt payment, contribute to this end. Some examples include advertising requirements on low-value contracts through Contracts Finder website and simplified procedures.

37.3. Implementation mechanisms

An “SME Panel” comprised of industry representatives from the SME community meets on a quarterly basis and acts as a critical stakeholder, giving advice on and making recommendations for the polices.

37.4. Monitoring performance

The status of a supplier is primarily self-certified and is assessed after the contracted is awarded. As the target is based on spend rather than contract values, the assessment is focused on the actual spend. Additionally, as the selection criteria are based on best commercial outcome, there is a need to ensure that the status of a supplier does not skew the commercial decision. The measurement of spend with SMEs is performed on an annual basis and each department has its own target and plan against which they are measured.

The United Kingdom also centrally monitors prompt payment of invoices. While there exists a statutory limit for invoice payment, which is under 30 days, 80% of the invoices were paid within 5 days (Crown Commercial Service, 2016[2]).

References

[2] Crown Commercial Service (2016), Central government prompt payment performance, https://www.gov.uk/guidance/central-government-prompt-payment-performance.

[1] OECD (2017), Financing SMEs and Entrepreneurs 2017: An OECD Scoreboard, OECD Publishing, Paris, http://dx.doi.org/10.1787/fin_sme_ent-2017-en.