Only a fifth (20%) of procurement spend from the wider public sector, including central government, went to SMEs in 2024.
That’s according to the latest report by the British Chambers of Commerce and data provider Tussell, in partnership with technology firm AutogenAI.
The BCC’s SME Procurement Tracker powered by Tussell – now in its third year – is the market’s benchmark source for reporting on how well the government is supporting small businesses by doing business with them.
The report reveals that absolute public spending directly with SMEs continues to grow, £45.4b in 2024, compared with £42.4b in 2023. However, the proportion of spending is in a rut, sitting at 20%. It was a similar picture in 2023 (19%) and back in 2019 (20%).
The 2024 data shows the state of play just before the Procurement Act came into force, in February this year. PPN 001, accompanying the Bill, explicitly sets out the requirement for all central government departments, their executive agencies and non-departmental public bodies to set targets for direct spend with SMEs and to publish results annually. The report offers a timely analysis of how things stand at the end of 2024, and where work still needs to be done to make it easier for small businesses to access public sector supply-chains.
Based on open procurement expenditure data published by public bodies for transparency purposes and then analysed by Tussell, the value of total reported public sector spend on third party procurement 2024, was £227.7b.
Local government had the highest procurement spend directly with SMEs last year, both as a share of total procurement spend (35%) and in absolute terms (£28.1b). The figure for the NHS was 19% of total spend and £7.9b in absolute terms, while for central government the figures was 11% (£6.9b).
Public sector spend with SMEs varies across different sectors. SMEs in the Health and Social Care sector earned £14.0b in direct public sector revenue in 2024 This accounts for 33% of total public spend in the sector, up from 28% in 2019. £5.0b was spent on public sector spending with SMEs in the education, training and recruitment sector.
Within central government, the Department for Culture, Media and Sport spent the highest proportion of its procurement spend directly with SMEs in 2024. DCMS spent 28% of its procurement total (equivalent to £240m). The Department for Education spent the highest absolute amount directly with SMEs, amounting to £2.4b in 2024, or 26% of its total procurement spend.
Jonny Haseldine, Head of Corporate Governance and Business Environment Policy, at the British Chambers of Commerce said, “Public procurement spend with SMEs continues to be stuck in a rut.
“While it’s good that the value of contracts with SMEs continue to rise, small and medium sized firms are still a small slice of the procurement pie at 20%. For too many businesses, government contracts are out of reach.
“Much now rests on the impact of the much-anticipated Procurement Act. The legislation needs to quickly deliver a more streamlined and effective system, which benefits prospective suppliers, particularly SMEs.
“In challenging times, firms across the UK are holding their breath for a gear change in the procurement system.”
Gus Tugendhat, Founder of Tussell said, “This edition of the Tracker arrives at a pivotal moment. By the end of May 2025, Central Government departments are expected to have established direct procurement targets for SMEs. This Tracker provides a timely and essential benchmark for contracting authorities aiming to set, and deliver on, these new objectives.
“Tussell’s analysis offers a stark reality check: meaningful progress remains elusive. In 2024, SMEs secured just one in every five pounds spent directly with private sector suppliers — unchanged from five years ago.
“Central Government and NHS bodies, in particular, have yet to demonstrate real momentum. Despite policy focus, SME engagement levels have remained flat since 2019. In contrast, Local Government presents a more encouraging picture. Their steady, year-on-year gains highlight what’s possible when ambition is matched with action.
“The recently enacted Procurement Act gives public bodies greater flexibility and stronger levers to involve SMEs in the procurement process. When we next publish the Tracker, we’ll see whether authorities have truly seized this opportunity.”
Sean Williams, Founder and Chief Executive, AutogenAI, “Taxpayers benefit most when public services are delivered through fair competition, ensuring efficient use of funds for the best outcomes. However, smaller businesses and charities often struggle to compete with larger firms due to overly complex procurement processes, not a lack of expertise.
“Technology, such as large language models and artificial intelligence, can help smaller organisations present their value more effectively in procurement exercises, creating a fairer playing field. Yet, technology alone is insufficient. Simplifying procurement processes is essential to foster inclusivity and competition, ultimately delivering better public service outcomes and improved value for taxpayers.”
