The Impact of Local Authority Procurement on Local Economies

Abstract

Public procurement has a significant impact on economic development in regions and localities. Previous research in the UK has focused on variations in government spending across regions, the effects of competitive tendering processes and EU State Aid rules on regional economies. Empirical studies of procurement at the level of local authorities have received less attention. Increasing pressure to be ‘efficient and effective’ in use of public resources can contradict the need to support local communities, particularly through a period of economic downturn. Until recently, there has been a paucity of relevant data at a local level to examine the impacts of procurement. This paper analyses the combined patterns of spend of eight Local Authorities in the County of Cumbria in North West England. The characteristics of the supply base are investigated using a two-stage survey of businesses that secure local authority contracts. Results show the characteristics of suppliers and their level of dependency on local authority contracts. Managers’ evaluation of the advantages and disadvantages of contracting with the public sector are also analysed. The findings suggest that many small and medium enterprises (SMEs) in Cumbria rely upon local authority contracts for business stability. The interviews confirm the vulnerability of SMEs to the current trend towards more formal approaches to public procurement and the use of a narrow definition of ‘value for money’. The paper concludes by considering the implications of the findings for the extent to which local authorities have retained a capacity to act to support local economic development.