£3bn windfall for small businesses in Darling's budget

Public sector's £16bn IT budget could soon embrace smaller players

Small businesses were promised a £3bn windfall in yesterday's budget due to a pledge to increase the amount the public sector spends with SMEs.

Chancellor Alistair Darling said central government departments will have to increase their contract spend with SMEs by 15 per cent.

The policy will boost SMEs' annual revenues by £3bn, according to the Chancellor. He added their revenues would increase by £15bn if the entire public sector were to adopt the policy.

Small businesses will benefit from a budget pledge to make central government departments spend more money with SMEs
(Photo credit: Shutterstock)

The public sector spends around £16bn on IT annually, around two-thirds of which is outsourced to external suppliers.

The Tories have previously called for government IT contracts to be made more accessible to smaller vendors. And a government cloud computing initiative called the G-Cloud will also serve to open up public sector deals to SMEs.

Central government departments will begin working towards meeting the 15 per cent target from summer this year, when the government will publish how much Westminster spends on SMEs.

The Chancellor did not specify when central government departments would be expected to meet the target.

A series of measures are to be implemented within Whitehall to make it easier for SMEs to bid on central government contracts.

These include requiring departments to publish contract opportunities through a single portal that suppliers will be able to access free of charge from December 2010; flagging contracts as being suitable for SMEs; providing free training to SMEs on bidding on government contracts; and encouraging major suppliers to use more SMEs as sub-contractors.

The Federation of Small Businesses (FSB) said it is important that the 15 per cent of government spending is directed towards micro-businesses - those employing less than 10 people.

John Walker, national chairman of the FSB, said in a statement: "This budget has provided welcome news on helping to improve small businesses' cash-flow."