Boost for businesses as new powers save contracts for local areas
Source: gov.uk (2025-12-02)

Billion pound boost for small businesses as councils get new powers to save contracts for local communities

Councils, police and fire authorities in England to now be able to reserve bidding for lower-value contracts to just local and UK suppliers.

Reforms pave way for more than £1 billion of potential spend to be reserved every year for local and UK firms.

Latest in a series of reforms to open up government work to small businesses and create skilled local jobs.

Small businesses are set to benefit from £1 billion of funds every year through laws proposed today allowing local authorities to reserve some contracts for suppliers in their area.

These reforms are the latest in a series to unlock growth by slashing commercial red tape, simplifying the public contracts regime and removing barriers for smaller firms to work with government.

Under the changes, councils, fire and police authorities in England will now be able to reserve competitions for their lower-value contracts to UK-based suppliers and suppliers in a defined local area.

Chris Ward, Parliamentary Secretary at the Cabinet Office, said:

We’re changing the rules that have held back councils from investing in local businesses that are the lifeblood of local economies.

This will put power back in the hands of our communities to drive growth, unlock skilled jobs and create local investment that rewards working people.

Alison McGovern, Minister of State for Local Government and Homelessness at the Department for Housing, Communities and Local Government said:

We want councils to help create jobs, opportunities and growth right across the country.

Making sure they can prioritise our brilliant local businesses is a huge step forward in achieving that, and will mean more money going to firms that know their areas best and can invest in the communities they serve.

The move, disapplying section 17(5)(e) of the Local Government Act 1988 in certain circumstances, gives local authorities the tools to support growth in their communities, while maintaining the core principles of fair competition and value for money when awarding below-threshold contracts.

The new voluntary rules also brings the public sector in line with the flexibility that Whitehall has to buy goods and services.

It follows a new National Procurement Policy Statement published in February, which set out an expectation for public bodies to provide wider social and economic value when awarding their contracts. Over the summer, the Government also consulted on proposals that would utilise spending by public sector bodies when buying everyday goods and services to create more opportunities for local small businesses and social enterprises, deliver social value by creating good local jobs, open up work opportunities and boost skills.

Tina McKenzie, Policy Chair of the Federation of Small Businesses, said:

It’s great to see the Government listening to small businesses and taking action. This is exactly the kind of practical reform we called for - giving local authorities the tools to make it easier for small firms to take on public work.

Small firms bring deep local knowledge, strong community ties and specialist skills. When the system clears unnecessary hurdles and lets them compete on fair terms, the whole community benefits. Today’s announcement is a welcome sign that those barriers are finally starting to come down.

Cllr Dan Swords, Chair of the LGA’s Public Service Reform and Innovation Committee, said:

Councils have a key role in driving local growth and these changes will give them greater freedoms to buy local, keeping more of what they spend in their local communities.

Local suppliers, SMEs and voluntary and community organisations will all benefit from councils being able to reserve below-threshold contracts for them, creating jobs and increasing supply chain resilience, to help meet our shared ambition with government to boost inclusive local and national economic growth.