84% of UK government tech spend goes to 150 suppliers
A Startup Coalition report says founders have stopped believing the state will buy from them. The numbers behind that, and the parts of the process that stop bids cold.
Eighty-four per cent of UK government technology spending last year went to just 150 businesses, according to figures from the data firm Tussell cited in a new report from the Startup Coalition. The majority of those 150 were foreign companies.
The lobby group, which represents technology start-ups and scale-ups, says the result is an industry "increasingly losing faith in the UK government as a buyer and champion". It calls the current moment "the last-chance saloon" after what it describes as warm words from successive administrations.
The wider small business picture is less concentrated but still short of target. In 2015 David Cameron said a third of central government procurement should go to small and medium-sized enterprises by 2020.
Estimates from Tussell and the British Chambers of Commerce put the figure at 21 per cent last year. That is a six-year high, and it is well under half the goal set eleven years ago.
The politics have shifted. In his first speech as prime minister, outside Downing Street on 20 July, Andy Burnham said he would "use public procurement to back British industry".
John Healey, the chancellor, said the government would "buy British not if possible, but by design" in technology, defence and artificial intelligence. The government says it is using £90 billion of public contracts to deliver "good growth in every postcode".
Two changes have already landed, both in the "social value" rules used to score bidders. The Cabinet Office has doubled the credit given for social value delivered through local employment, and scrapped the rewards previously given for net zero and diversity commitments.
It has also raised the threshold at which social value criteria apply at all, to £1 million from £139,688. For a founder chasing contracts under that line, the scoring conversation has effectively disappeared.
The Startup Coalition calls the social value changes a "potential turning tide", then says they are nowhere near enough. "Warm words from the top will not be enough to turn a tanker that is inert, risk-averse and slow to seize new opportunities," the group said, arguing for change at every point in the buying process.
The report identifies the blockages founders hit: risk aversion among buyers, long delays, and difficulty reaching the person who can actually sign.
Then there are framework agreements, the long-term purchasing arrangements through which 26 per cent of public procurement is agreed. They open only every few years, carry heavy bid requirements, and leave companies waiting for approval once they are on them.
"All too often, processes and bureaucracy act as barriers for SMEs," said Rachael Crook, chief executive and co-founder of the health and care platform Lifted.
For a founder weighing a public sector bid, the arithmetic in the report is the point. If your product sells for under £1 million, social value scoring no longer applies to you. If your route in is a framework, you may be waiting years for the door to open. And the cost of the bid itself is paid in the months your team is not shipping.