Public procurement experts Tussell have analysed the local government procurement market for the financial year 22-23.
Local authorities spent billions with a select group of 39 companies in the last financial year, new analysis shows.
The 39 ‘strategic suppliers’ are a group of companies that the Cabinet Office takes a hands-on approach to managing the Government’s relationship with, due to the importance of the services they provide.
The group of suppliers includes many household names, like Virgin Media, Vodafone and BT. Their specialties span several sectors, including consultancy, defence and telecoms.
A new report from procurement analysts Tussell found that in financial year 22/23 the UK public sector spent a staggering £222bn on procurement as a whole – a record amount.
Of this, the 39 strategic suppliers earned £18.9bn, totalling 9% of the market.
Compared to the prior financial year, this represented a 17% drop in direct public sector revenue.
Of the £18.9bn spent with the group in financial year 22/23, £2.8bn - or 15% - came from local government.
Central Government, by contrast, spent £7.7bn with the strategic suppliers – the group’s largest customer base.
Among local authorities, Manchester City Council spent the most with the 39 suppliers, at £138m (up 61% on the last financial period).
This was followed by Birmingham City Council, at £108m, and Staffordshire County Council, at £103m.
‘Although local authorities may not be the strategic suppliers’ largest source of revenue, they undoubtedly play a significant role in delivering key services and projects across local government,’ says Lorna Ingwell, Tussell’s senior researcher.
Tussell data shows that in financial year 22/23 alone, local government authorities awarded over 900 contracts to the 39 strategic suppliers. The largest contract - Housing High Rise Improvement Works - was awarded by Leeds City Council to Equans for £1.5bn.
‘A large share of local government’s spending with the strategic suppliers relates to construction and facilities management services,’ says Lorna. Kier, Balfour Beatty, and Equans earned the most from local authorities in financial year 22/23.
Despite these large invoices, analysis suggests that local authorities may be loosening their reliance on the strategic suppliers.
Local government spending with the group has declined every financial year since financial year 18/19, from £3.3bn to £2.8bn.
‘Efforts by local authorities to work more with small and local suppliers might be bearing fruit – procurement teams are making a concerted effort to rely less on the kind of larger companies represented by the strategic suppliers,’ says Lorna.
Tussell’s annual analysis of the strategic suppliers also found that the group are making heavy use of framework agreements as a route-to-market in the public sector. Meanwhile, the ‘Challengers’ - comparatively high-earning suppliers not in the group - were found to be growing their public sector revenue faster than the strategic suppliers.
Access Tussell’s 2023 analysis of the Strategic Suppliers.
