A new Tussell and LocalGov.co.uk report reveals how local authorities are using their £81bn procurement power to drive regional growth, support SMEs and VCSEs, and deliver social value—while highlighting where 28% of councils risk falling behind.

In 2024, local authorities across the UK spent more than £81bn on procurement—over 3% of the nation’s GDP. Of that, £35bn went directly to local firms, marking councils out as major engines of regional growth. But a new report from Tussell and LocalGov.co.uk suggests that not all authorities are using this purchasing power to its full potential.

The 2025 Local Government Procurement Report sheds light on how councils are—or aren’t—embedding social and economic value into their procurement strategies. Drawing from the Local Government Procurement Index, which benchmarks 311 councils, the report reveals who’s leading the charge, who’s falling behind, and what procurement teams can do to improve.

Councils Outperform Whitehall on SME and VCSE Spend

Local government significantly outpaces central government when it comes to inclusive procurement. In 2024, local authorities spent:

• £28.8bn with SMEs

• £8.7bn with VCSEs

• £35bn with local firms

That’s more than four times what central government spent with SMEs during the same period.

The data confirms that local government procurement is closer to communities, better able to support small businesses and third sector organisations, and uniquely positioned to deliver on the National Procurement Policy Statement's social value mission.

Social Value: A Mixed Picture

While overall spending with SMEs and local businesses is on the rise, there’s growing concern about the declining share going to VCSEs. Direct spend with VCSEs rose 32% between 2020 and 2024, but that’s slower than the 42% rise in total procurement. As a result, VCSEs are losing market share—a worrying trend given their critical role in community health, wellbeing, and inclusion.

This raises pressing questions: Are procurement processes unintentionally excluding VCSEs? Are evaluation criteria placing too much weight on price over impact? The report recommends reserving contracts for VCSEs, building supplier capacity, and placing greater value on community outcomes to reverse this decline.

Regional Standouts and High Performers

Not all councils are created equal in procurement performance. The Index categorises authorities into four tiers: Room for Improvement, Socially-Oriented, Locally-Oriented, and High Performers.

• The North West and London dominate the top of the Index. Over 50% of councils in these regions are classified as High Performers.

• Rural regions like the South West also stand out. More than 75% of its councils rank in the top half nationally for local supplier spend—disproving the myth that only urban authorities can lead on local procurement.

Interestingly, district councils and even newly devolved Combined Authorities, such as the North East, feature prominently among the top performers, showing that size and scale need not be barriers to SME or VCSE engagement.

28% of Councils Still Lag Behind

Despite these successes, 28% of UK councils still fall below average in their proportion of spend with SMEs, VCSEs, and local businesses. For these authorities, the report offers both a wake-up call and a roadmap. The key message? Benchmark your performance, learn from top-ranking peers, and use data to drive decisions. With the Procurement Act now in force and devolution expanding, the cost of inaction could mean missed opportunities—for both communities and council finances.

Key Takeaways for Procurement Teams

1. Track and benchmark your SME, VCSE, and local spend against national averages.

2. Study high-performing councils—such as those in the North West and South West—for replicable strategies.

3. Explore reserved contracts, especially for VCSEs, to boost inclusion.

4. Invest in supplier engagement and capacity-building to diversify your bidder base.

5. Use tools like Tussell’s market insight platform to identify local and social value suppliers.

Policy Reform, Real Results

With the Procurement Act unlocking new tools and powers, local authorities have a once-in-a-generation chance to rethink how procurement serves their communities. From outcomes-based commissioning to community wealth building, smart procurement is not just about compliance—it’s about delivering real impact.

Tussell will be hosting a webinar, Delivering Better Procurement under the Procurement Act, on September 17th, offering real-world examples from high-performing councils and practical guidance for implementation.

Final Word: Procurement as a Strategic Asset

Local government procurement is no longer just a back-office function—it is a strategic lever for economic growth, social inclusion, and local resilience. The 2025 Local Government Procurement Report shows that many councils are already leading the way. But with 28% still underperforming, there is clear room for improvement—and ample opportunity for transformation.

By investing in data, engaging with local and social suppliers, and embedding long-term value into every contract, local authorities can ensure procurement works not just for the council, but for the whole community.

To download Tussell & LocalGov's Procurement Report, click here. To see where how your council's procurement ranks nationally, head over to the Local Gov Procurement Index. Learn how to turn these insights into meaningful action, at Tussell's September 17th webinar session.