Public sector procurement with small to medium-sized businesses (SMEs) has risen by 11 per cent in the most recent financial year in Scotland.
Spending with small firms rose from 55p in the pound to 61p, new figures released by the Scottish Government have shown.
Total known public procurement in 2022-23 delivered an estimated 120,000 full-time equivalent jobs and £7.5 billion to Scottish gross domestic product (GDP).
The sixth annual report on procurement activity in Scotland shows that known procurement spend generated an estimated £13.7 billion in economic activity.
Small or medium size enterprises (SMEs) in Scotland benefited from more recorded procurement spend compared to the previous year. 61 pence in every pound spent in Scotland was with SMEs, up from 55 pence in every pound the year before.
Public finance minister Ivan McKee said: “Public procurement contributes billions to Scotland’s economy and supports thousands of jobs.
“The increase in contracts awarded to SMEs is particularly welcome. SMEs are critical to the economic lifeblood of Scotland and can often bring an agility and flexibility that allows them to introduce innovative solutions faster than larger organisations.
“Public procurement has a pivotal role to play in delivering a sustainable future for Scotland and with a spend that is now in excess of £16 billion a year, we have an opportunity to make a real difference through using this in even more productive and innovative ways.”
Under the Procurement Reform (Scotland) Act 2014, public bodies must consider and act on opportunities to achieve economic, social and environmental benefits through spending on goods and services.
Public bodies include local authorities, universities, NHS health boards and housing associations.
The report also shows known Scottish public sector procurement spend totalled £16.6 billion in 2022-23, of which £8.9 billion was spent in Scotland alone.
Suppliers based in the 60% most deprived areas received approximately £500 million more known procurement spend on the previous year, totaling £4.8 billion.
Third sector organisations received an estimated £1.2 billion (or 13.3%) of known public procurement spend in Scotland during the reporting year.
107 public bodies reported examples of the ways in which environmental wellbeing and climate change were addressed through procurement.
Some 18,079 suppliers were awarded contracts through the Public Contracts Scotland platform. Of these suppliers, 77% were SMEs.
Business trade body the Federation of Small Businesses (Scotland) welcomed the uptick in investment in SMEs.
But they also warned that many were put off by red tape.
Guy Hinks, FSB Scotland chair, said: “Given the undoubted benefits that come with spending public money locally, it is good to see a slight increase in contracts being awarded to SMEs. Every pound spent with a local business goes further in supporting local jobs and communities than one spent with national and global chains.
“This highlights the huge potential for increasing investment in communities across Scotland if we can shift the dial on public procurement. Significant barriers remain for small businesses looking to bid for public contracts. FSB research shows two thirds of SMEs who bid for contracts find the process complex, challenging to navigate and unsatisfactory.
“The Community Wealth Building Bill is a great opportunity to tackle this and we would like to see statutory targets for increasing local spend introduced to make sure that opportunity is not missed.”