Public Procurement (British Goods and Services) Bill

“When we leave the EU, we will be able to encourage the public sector to ‘Buy British’ to support our farmers and reduce environmental costs.”

This has simply not happened. Now is high time for some of the benefits voters were promised from Brexit to come to pass. My Bill, if the Government accept it, would deliver more contracts to British businesses.

This is not a new issue. Since my election in 2012, I have been continuously highlighting how the UK Government need to do more to support British steelmakers through public procurement. The UK steel industry employs almost 40,000 people directly, with another 50,000 jobs supported through the supply chain. It also directly contributes £2.9 billion to the UK economy and adds £3.8 billion indirectly through supply chains. My constituency of Rotherham is a hub for steel production. We are incredibly proud of that heritage. Liberty Steel employs 900 people locally and supports the employment of many more workers throughout the steel chain. We make unique, speciality green steel much valued around the world, especially in aerospace. Despite this expertise and the high-quality steel that Liberty and other steelmakers produce, our steel industry still needs Government support. Let me be clear that I am not talking about handouts; I am talking about public contracts. UK Steel analysis of the 2023 steel pipeline report found that of the £603 million-worth of steel procured by government in the last financial year, 2022-23, only £365 million-worth was UK-produced. Furthermore, the British Constructional Steelwork Association analysis of steel used in the HS2 project found that only 58% of steel contracts were awarded to British suppliers, despite the British steel industry having the capacity to have carried out 100% of the work.

I welcome the recent introduction of the UK steel safeguards and the fact that UK Government Departments are now required to report past buying and future purchase pipelines of UK-made steel bought by the public purse. Those measures, particularly the reporting of where the steel is procured from in projects, are designed to encourage the uptake of UK-produced steel. The mandatory reporting model is a good template for other industries and Departments, and I welcome it. My Bill takes that mechanism and seeks to use it to achieve similar results across the economy, compelling contracting authorities to publish where they are procuring from, and to encourage the uptake of goods and services from British suppliers.

Let me give another example. I am sure hon. Members are aware that the public procurement system is failing our great British farmers. I strongly believe we must support our local food producers by ensuring that we buy, sell, make and grow more of our food, entrenching Britain’s reputation as a beacon for quality food, high standards and ethical animal treatment. The UK public sector spends about £2.4 billion a year procuring food for organisations such as schools, hospitals and the armed forces. That accounts for approximately 5.5% of UK food sector sales. Despite that level of spending, there is no accurate measure of how much food the public sector procures from British farmers. My Bill will address that.

The British public support buying British. The online supermarket Ocado reported that 87% of its customers considered it important to support British farmers, with searches for British produce on its website up by 77% year on year—

I turn to another key driver behind the Bill, which is enabling small and medium-sized enterprises to access public contracts. SMEs make up 99% of UK businesses and account for 61% of employment. Despite being the beating heart of our economy, research from the Federation of Small Businesses has found that SMEs are effectively shut out of the public procurement system. Only one in five SMEs has bid for a public sector contract in the last three years. In the construction industry, a sector heavily reliant on SMEs, only two in five SMEs have bid for a public sector contract in the last three years. Of SMEs new to public sector opportunities—those with experience of between one and nine bids—49% have failed to secure a single contract in the last three years. The lack of transparency means that they do not know why they have failed. Submitting a tendering application is a resource-heavy process. If an SME keeps getting knocked back, the stats show that it will eventually stop trying.

The National Federation of Builders, a trade association representing the interests of small and medium-sized house builders, told me that one of its members had not successfully bid for a public sector contract for over a decade, even though it is well qualified to deliver. Sadly, this situation is replicated across most sectors. Of course some SMEs are rejected for good reasons, but there is clearly a cultural issue in public contracts being awarded to large, often multinational businesses over SMEs.

By amending section 1(3) of the Public Services (Social Value) Act 2012, my Bill seeks to add an obligation for contracting authorities to consider how procuring from small and medium-sized enterprises might improve their area’s wellbeing. Clause 2 will require contracting authorities to report how they have complied with this obligation. It is hoped that these changes will increase the importance of SMEs within social value tenders and will encourage the public sector to award more contracts to them.

As I mentioned, billions of pounds of public contracts are awarded to foreign suppliers every year. The most recent data shows that a substantial number of contracts are awarded to foreign suppliers both directly and indirectly —indirectly being when a foreign supplier controls the successful applicant for a contract. Of public contracts valued below £200 million, 2.3% were awarded directly to foreign suppliers, but this rose to 17.6% when indirect awards were accounted for. The story is similar for contracted values over £200 million: 2.1% were directly awarded to foreign suppliers whereas 31.5% of contracts were indirectly awarded to foreign suppliers.

An example of such a contract is the £1.6 billion Royal Navy contract awarded to a Spanish-led consortium in 2022 over an all-British one. Analysis shows that at least 40% of the work, worth £64 million, will go abroad and be carried out in Spain. To compound this issue, there have been no concrete answers as to whether there is a limit on how many jobs will be created in Spain and why there are no targets for UK steel in the contract.

“must support the delivery of public sector policy priorities, including generating economic growth, helping our communities recover from the Covid-19 pandemic, and supporting the transition to net zero carbon.”

It goes on to outline how:

“Public procurement should be leveraged to support priority national and local outcomes for the public benefit… Contracting authorities should consider the following social value outcomes”

when procuring such goods and services. My Bill seeks to cover all those, but I would be a little stronger on the “should” becoming a “must”. Aside from that, I think we are absolutely on the same page.

To conclude, my conversations with Rotherham businesses and national industry groups have made it clear that the changes I am proposing are welcome and overdue. I defy the Minister to find anyone in the UK who would not see this as common sense. Implementing the changes will increase transparency and encourage more public contracts to be awarded to British suppliers. By supporting this Bill, the House has an opportunity to demonstrate their support to British manufacturers, builders, farmers and SMEs. I thank the Labour Front Benchers for their support, and I am grateful to the members of the working group who helped me to develop it— the TUC, UK Steel, National Farmers Union, the RSPCA, the YPO, the Countryside Alliance, APSI, Bloom Procurement Services, the National Federation of Builders and Jonathan Davey—for all the help, support and guidance they have given me to date.