From barriers to solutions: procurement challenges for UK SMEs

There’s no two ways about it—Small and Medium Enterprises (SMEs) are the backbone of the UK economy, contributing significantly to employment, innovation, and economic growth. To really demonstrate this point, here are some key statistics about SMEs from the Federation of Small Businesses:

• At the start of 2023 SMEs account for 99.9% of the total business population; small businesses (with 0 to 49 employees) accounted for 99.2% alone.
• 16% of all SMEs were operating in Construction.
• SMEs account for three-fifths of the employment and around half of turnover in the UK private sector.

These statistics highlight that when discussing SMEs, we are predominantly talking about small businesses, and if we push the boundaries further, we also need to consider Voluntary, Community and Social Enterprises (VCSEs).

Despite their vital role, SMEs often encounter substantial barriers in accessing public and private sector procurement opportunities. In a guest blog for TechUK, Andrew Hawkins discussed the results of the seventh annual GovTech SME Survey, which highlighted the top challenges faced by SMEs:

• A lack of early industry engagement
• Too many procurement frameworks
• There is a risk-averse culture within the civil service
• The administrative burden of addressing social value in contracts

While the inclusion of administrative burden was expected, I was surprised by the specific focus on Social Value amidst all the other administrative processes involved in procurement activities, such as prequalification, bidding processes, and payment procedures.

In addition to the findings of the GovTech SME Survey, our investigations as part of the Procurement Leadership Group of the Supply Chain Sustainability School uncovered similar barriers, such as the time/duration of the procurement process (administrative burden) and the effect of business risk models within larger organizations on SMEs (risk-averse culture). Additionally, we identified other procurement barriers, including (but not limited to) challenges related to the quality of procurement processes and a disconnect between procurement and operational functions affecting on-site logistics. However, the most prominent barrier, echoed by both buyers and suppliers involved in our investigative process, was the lack of quality communication between parties, leading to significant gaps in understanding and collaboration.

Addressing these procurement barriers is essential for harnessing the full potential of SMEs in the UK. From the statistics highlighting their significance to the challenges revealed by the GovTech SME Survey and our own investigations with the Procurement Leadership Group of the Supply Chain Sustainability School, it’s evident that SMEs are continuing to face numerous obstacles in accessing procurement opportunities. Whether it’s administrative burdens, operational concerns, or communication gaps, these challenges must be addressed to create a more inclusive and equitable procurement landscape.

For more information or to explore how Action Sustainability can support your organisation, please contact our team.