Public procurement experts Tussell find that local government spending with the Government’s ‘strategic suppliers’ has remained flat for five years.

Local government is spending billions with the 39 ‘strategic suppliers’, new analysis finds.

The latest edition of Tussell’s annual strategic suppliers report analyses how much the UK public sector spends with the Government’s 39 designated key suppliers.

The strategic suppliers are a group of companies that the cabinet office takes a hands-on approach to managing the UK Government’s relationship with, often because of the critical services or contracts they deliver.

The group includes household names like Microsoft, Virgin Media and BT. Their specialities span several sectors, including consultancy, defence and telecoms. Just under half are headquartered in the UK.

Tussell’s new analysis finds that the UK public sector spent £222.1bn on procurement in the 2023-24 financial year - up 6% on the previous fiscal period.

Of this, £22.1bn (10%) went directly to the strategic suppliers.

Central government accounted for the biggest proportion of this sum, at £7.8bn (35%)

Local government, by contrast, spent £3.4bn (16% of the total) directly with the group.

This figure has remained largely flat for the past five fiscal years, and accounted for just 4% of total local government procurement spending in the 2023-24 financial year.

'Compared to central government, the strategic suppliers’ presence in local government is significantly smaller', says Lorna Ingwell, Tussell’s research manager.

'To put the group’s local government market share into context: 34% of local government procurement went directly to SMEs in the same period - a testament to local authorities’ continued efforts to boost social value in their supply chains.'

Since total local government procurement has consistently increased year-on-year, the strategic suppliers’ share of the local government market has gradually decreased.

'Across both central and local government, the strategic suppliers are losing market share', says Lorna. 'This could be reflective of public sector efforts to diversify supply chains, and disaggregate large contracts.'

Most of local government’s strategic supplier spending went to its construction & engineering specialist members - such as Bouygeus Group UK, Kier, Balfour Beatty and Amey.

By growth, Tilbury Douglas, Sodexo and PwC saw the highest growth in local government revenue across the last two fiscal periods; Sopra Steria, by contrast, saw the sharpest decline in revenue from local authorities.

Despite not accounting for a large share of the Strategic Suppliers’ public sector business, the group still deliver a number of important contracts for local authorities.

In the 2023-24 financial year, local authorities awarded 706 contracts to the strategic suppliers. The largest by value was a £603m ‘repairs and maintenance’ contract, awarded by Birmingham City Council to Equans (and a non-strategic supplier, Fortem Solutions).

Tussell’s analysis also found that the strategic suppliers are successfully capitalising on framework agreements to win new contracts, and that a handful of central government departments spend over a third of their procurement directly with the group.