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Credit where it's due for SMEs

Editorial Type: Opinion     Date: 01-2015    Views: 4103      









Why do SMEs still find it difficult to break into public sector procurement opportunities? CCube Solutions' MD Vijay Magon suggests that one solution may come in the form of accreditation and adherence to standards

Public procurement from small firms has been much discussed in several UK Government reports. Wider policy on small firms has also been well documented and there is a substantial academic literature on the role of small firms in a dynamic economy. According to the Department for Business, Enterprise & Regulatory Reform (BERR)'s Enterprise Directorate Analytical Unit, in 2007, the UK economy is 99% SMEs. So out of a total of 4.8m UK businesses, less than 1% are large corporations (i.e. over 250 employees). For now, let's ignore one-man-bands who represent a huge 73% of all UK businesses yet only account for 7.4% of Gross Domestic Product (GDP). UK SMEs, employing one person or more, employ over 14 million people out of a working population of approximately 30 million.

In terms of UK turnover and GDP UK SMEs account for £1.48 Trillion Pounds. Despite being only half the story and half the picture, large UK Corporations dominate the skyline, the news and the economy. Business news daily is full of stories about BP, Barclays, M&S, British Gas, BT, and the UK Government. There is a strong political focus on the UK Public sector, which is responsible for up to 1/3rd of UK's economy.

So, what is the problem? Why do SMEs continue to struggle for a fairer share of the public sector business?

In general, high growth SMEs: • Are more R&D intensive;
• Are twice as likely to innovate;
• Place greater emphasis on hiring skilled employees and motivating staff;
• Tend to be younger;
• Are more often involved in alliances;
• Are more likely to be partly or wholly

owned by others. Various reports list the following areas of potential benefit from procuring from SMEs.

• Competition
• Cost
• Innovation
• Responsiveness
• Flexibility
• Quality of service
• Specialism

MISSING THE TARGET
While there is plenty of evidence about the role of SMEs in the UK economy, indeed, recognition about achievements made by SMEs, there is at the same time general acceptance of the struggle faced by SMEs, about barriers in winning public sector contracts, even with Government initiatives to reduce these barriers and brave goals for "… SMEs to win 30% of all public sector business." In the real world, the facts paint a different picture: around 7-8 per cent of sales are accounted for by central government expenditure for SMEs that generate more than £5m, turnover; this percentage falls to 4-5 per cent for businesses with a turnover below £0.25m.

Government announcements and initiatives indicate a raft of specific policies directed at increasing productivity, many of which are aimed directly at SMEs and on which the views of SMEs are invited. There are strong grounds for believing that SMEs play a key role in innovation and growth. The Government would like to make the UK the best place in the world to start and grow a business. There is evidence to suggest that there is no doubt that successful businesses are set up, and run, by enterprising individuals - but it is the Government that shapes the environment within which they do business. Those in government have the responsibility to support business success.



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