A zero cost approachto supporting your local economy
The current economic situation presentssignificant risk to small to medium sized enter-prises (SMEs) in your local area. This paper aims to introduce simple measures you canimplement to support your local economy with-out spending any money.
The Economic Problem
Government is responsible for the purchasingof goods and services worth approximately£175bn
per annum which represents approxi-mately 13% of UK Gross Domestic Product.Local Government spends over £38bn per year on goods and services. Approximately50% of Local Government spend is with SMEsuppliers.40% of SMEs interviewed in a recent surveyby the UK Business Forum
believed that be-ing paid within twenty days for goods and ser-vices would be their preferred option for help-ing them to cope with the economic downturn.According to research commissioned byBacs
, the average amount owed to an SMEat any one time is approximately £30,000.Almost a third of SMEs in the same surveyclaimed they could no longer trade if facedwith overdue invoices of up to £20,000.In August of 2008, the Government set a newtarget for central government to pay SMEswithin ten days. Hazel Blears, the Secretary of State for Communities and Local Government,has asked that local government does thesame. However, Councils are wary of intro-ducing initiatives that will reduce the incomethey recover from interest payments. Under-standably Councils have been reluctant to es-tablish large early settlement initiatives.
The Real Cost of Poor Cash flow
However, Councils that are uncertain aboutproviding support to their local economyshould consider the likely impact of local busi-ness failures on their own finances, as well astheir local area. SMEs employ 59% of the pri-vate sector workforce
. The failure of local1SMEs can have a significant impact on financialand social costs for local councils. The mostimmediate effect is reduced revenues frombusiness rates. Unemployment from businessfailures create costs for local councils, includingincreased applications for housing benefit,council tax relief and free school meals.Rising unemployment is likely to have a great-est effect on young people looking for jobs. Acontracting employment market will force moreexperienced workers to look for lower paid rolesin order to gain work. This gives employers theoption to hire better skilled, experienced staff instead of school leavers and recent graduates.Higher unemployment has also been linked tohigher crime and increased social deprivation
Can Councils make a difference?
Councils can make a real difference. The Fed-eration for Small Businesses (FSB) has estab-lished a ‘Trade Local’ campaign to help Coun-cils understand what they can do to improve thebusiness environment for local businesses(google “Keep Trade Local”). The FSB cam-paign makes the case for Councils to consider local businesses when they are deliveringservices, highlighting the effect that planning,procurement and parking regulations can haveon local business.Supporting local businesses during a downturnis a matter of ensuring that money is flowinginto the local economy wherever possible. SoCouncils need to make sure that local businessare competing for Council contracts and thatpayments to those suppliers are made asquickly as possible. Overleaf we outline threeno-cost steps that a Council can take that willdo just this.
The Zero Cost Solution in 3 steps
Step 1: Get procurement to focus onlocal businesses
Contracts that are tendered under the EU pro-curement regulations state that a Council can-not award business to a supplier on the basis of a supplier’s location, but there are still a range
1. http://www.hm-treasury.gov.uk/d/pbr08_economicengine_2390.pdf 2. http://www.ukbusinessforums.co.uk/3. http://www.bacs.co.uk4. http://www.hm-treasury.gov.uk/d/pbr08_economicengine_2390.pdf 5. 55% of offenders completing community sentences are unemployed at thetime they start their community sentence.(source www.crimeinfo.org.uk)