British Small to Medium Enterprises (SME’s) are being forced out of supplying to the Public Sector by procurement policy demands that they cannot afford to implement.
About 20 years ago I worked for the Mayor of London, specifically Transport for London, and in that job I worked closely with the procurement department. Back then there was a huge drive to promote what was called “sustainable procurement”. The idea was to make it easier for local small businesses to supply and work with the various organisations under the Mayor’s remit. So if you needed to award a contract for paperclips, you allowed Bob’s Paperclip Emporium on Finchley Road to bid and you made allowances so that Bob could compete with the likes of Viking. The principle was very simple – to put money back into the community via local small businesses.
The principle spread to paying bills on time. Small businesses don’t have the access to cheap credit that large businesses have and they can literally face ruin if forced onto invoice schedules longer than 30 days. It got so bad around 2008 that in some industries corporates were putting suppliers on to six month payment schedules. The suppliers had little choice but to factor the invoices – to the uninitiated, to borrow money against the invoice, which obviously costs money. It became such a scandal that the Telegraph started to name and shame corporates doing this to their suppliers.
Larger suppliers always have lower costs through economies of scale, but cost isn’t always the reason why suppliers are appointed. Local suppliers often have local knowledge, hands-on delivery, and quick response times when issues arise. You often find more expertise among smaller suppliers. Finally, there is the social aspect, already mentioned. Engaging a supplier that is owned by an international conglomerate is literally sending money overseas. Surely, companies and especially public sector organisations servicing a community should consider their responsibility to that community?
So, why are we increasingly seeing smaller suppliers forced out of supplier relationships, particularly in the public sector?
One of my clients makes highly specialised products for the health sector. It has been doing this for decades and has a great reputation. Its skilled management and workforce means it’s a British success story and, until recently, it has been able to compete with larger suppliers from abroad. It employs about 50 staff in a rural location in the West Midlands and is exactly the sort of business that the Government should be encouraging and, where possible, assisting. It isn’t looking for any favours – its products are excellent and speak for themselves. All it wants is a level playing field on which to compete.
So, why has it withdrawn from the latest Cabinet Office Framework for the supply of its type of products into the NHS?
Firstly, what is a Cabinet Office Framework? The Cabinet Office runs a number of procurement frameworks to support the U.K. public sector.
Let’s say I am a recruitment agency who wants to supply bin lorry drivers into local Councils. I go on to the Cabinet Office Framework website and I look to see if there is an open framework accepting applications to supply. I find the framework specific for the provision of staff into local authorities and then have to jump through a series of hoops to ensure I meet the framework’s requirements. This is demonstrating that you’re a bona fide, solvent business with the right group of policies to meet the demands of the framework. Once I’ve secured one contract, I can bid to supply to any Council bin department looking for drivers who use that framework to help them engage with suppliers. The framework system is essentially there to support public sector organisations so they don’t have to do the donkeywork of checking out their suppliers. The NHS uses them extensively.
Now, you are probably aware that increasingly we have been seeing large organisations impose Environment, Social and Governance (ESG) policies on their suppliers through their procurement policies. Most notoriously, we are seeing quite radical Equality, Diversity and Inclusion (EDI) policies and training forced on to suppliers by corporate and public sector procurement teams. The purchasers want to demonstrate their commitment to ‘change’ and one way to do that is to force ‘change’ down through your supply chain by making demands on suppliers that have nothing to do with the product or service being supplied.
This started off as a fairly well-meaning and innocent initiative. For example, it is entirely reasonable to ask a supplier to demonstrate their health and safety policies are up to scratch before paying them to supply a product. It’s reasonable to ask them if they comply with waste disposal polices around toxic substances like asbestos. But it has become a charter for imposing a particular ideology through the supply chain.
If you are a politician who wanted to ‘change things’ in the 1980s or 1990s, you might have become an EU Commissioner. These days, it’s someone like Angela Rayner or Ed Miliband. Let’s say you want businesses to behave in a certain way. Well, here is a ready-made vehicle through which to secure ideological compliance.
And that is exactly what has happened. The framework agreements have been the enforcement arms of the state but also of anyone with an ideological axe to grind. Investment companies like Aberdeen Asset Management (I refuse to call them Abrdn) or pantomime villains BlackRock love them because they allow them to force all sorts of ideological policies – and accompanying training programmes – on their supply chains.
So, what’s the big deal? Surely, it’s all about box ticking? Well, yes and no. You see the procurement departments and the Cabinet Office know about box ticking so they go to great lengths to ensure that your business is compliant. ‘Lengths’ sometimes means forcing bidders to send their management teams for EDI training. It can also mean spending thousands of pounds and many hours writing long and involved ‘Net Zero’ strategies. It always means publishing an anti-slavery policy, even if your legally exempt from having to do so because your business turns over less than £45 million.
This last point is interesting. In the past, the government knew that saddling small businesses with unnecessary red tape undermines their ability to compete with larger businesses. The anti-slavery policies are there to make sure that you are doing everything possible to ensure that the products you are buying from overseas aren’t being made by slaves. As most businesses with a turnover of under £45m are not directly dealing with suppliers in this category, those businesses have been given a legal exemption in an attempt to level the playing field and make them more competitive.
Only the Cabinet Office are insisting that all bidders on their framework have an anti-slavery policy, regardless of size.
Last year, my client pushed back when an NHS trust insisted he send his senior management team to them for two days in the middle of a working week to take their EDI course. It wasn’t enough to have your own EDI policy. No, the client – in this case, an NHS trust – wanted to make sure your team had been indoctrinated with its ideological beliefs. The sheer hubris here is astonishing, but most staggering is how removed from the reality of commercial life you have to be to expect a small business to send three of its top people on a training course, half way across the country in the middle of a working week. Six man days, travel, hotel, the impact of them being out of the company. It’s essentially a whole week’s production, business development and administration down the drain to massage the egos of an NHS Trust leadership team who are probably chasing a gold star from Stonewall or similar.
And don’t for one minute think that you can get away with simply adding the training costs to the bill. This comes out of your pocket.
The final straw for my client was when the framework managers demanded an involved and detailed Net Zero strategy demonstrating how his business planned to become Net Zero over the next five years. This had to include figures, business plans, supplier choices, etc. He put his foot down and said no. He demonstrated how much it would cost him to produce such a document: over £20k in either his company’s time or, more likely, external consultancy fees, i.e., you pay a bunch of recent university graduates to write the documents for you.
So, he’s withdrawn from the framework, leaving it to large corporations who have departments whose only role is to churn out such policies and who have teams in their sales departments who are specifically there to win bids on frameworks.
My question for Ms. Rayner and others in the Government is this: “How do you expect small businesses to compete when you load them with so much red tape that it places them at a significant disadvantage to corporations?”
I won’t hold my breath for an answer because Labour have already stated that they intend to make EDI training and policies mandatory in Public Sector procurement. So at a time when the FTSE100 and 250 are pulling back on EDI, at a time when across the world, and in the USA, we are seeing employers dump DEI/EDI and U turn on the politicisation of the workplace, the UK Government is doubling down.
And what about my client? Well, NHS Trusts are so far not obliged to buy through the Cabinet Office Frameworks. They tend to though because it makes life a bit easier, but if you have a product or service they require they can buy it directly from you, it just involves a bit more work. Yes, they usually demand the same paperwork from you, but at least you can sit down with a human being and explain why you won’t be producing it and they can then decide whether they still want your product enough.
Cabinet Office Framework agreements are making life impossible for small to medium suppliers. Where ‘sustainable procurement’ once meant putting money back into the community by engaging with local suppliers, it now means ESG, EDI, interference, red tape and, of course, costs all of which make it very difficult for any smaller supplier to compete.
He’s now engaged with his MP but I wouldn’t hold my breath as the new government has demonstrated that it either has no interest in helping small to medium enterprises, and is following a series of policies that effectively transfers revenue from SMEs to corporate suppliers or they are so detached with the realities of running an SME in the UK in 2025 that they are making error after error.
Either way, it is yet another example of the egregious treatment SMEs are facing at the hands of the State.
C.J. Strachan is the pseudonym of a concerned Scot who worked for 30 years as a Human Resources executive in some of the U.K.’s leading organisations. Subscribe to his Substack page.
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We’re an SME under strong pressure from a prospective major customer in the private sector to come up with a “Corporate and social responsibility” policy.
Ask AI to come up with a document, top & tail it, email to your employees to read & reply.. Job done?
That’s what we are in the process of doing. My issue is not the difficulty in formulating a policy or demonstrating that we follow it (we won’t have to – all of this is just box ticking). My issue is that this is compelled speech and it’s part of “stakeholder capitalism” which I believe to be evil as well as contrary to prosperity.
As it happens most of what I’ve seen from a standard policy is stuff we do anyway as we have found that treating our staff, customers and suppliers in a fair and logical manner is best for long term business success. The only thing we don’t do is “community outreach” because it’s simply of no benefit to us and we’re a business not a bloody quango or social work organisation.
Whatever you do come up with, keep it super simple, 1 page if poss, high level intent etc. likely as you say, you do sensible things already to run a successful business. Unfortunately in big business this bs is rife and an industry in itself. Community outreach, you might find you do some things under this already, work experience, apprenticeships etc could all be covered in there in my opinion. Don’t know about your situation, size etc so may not be applicable
Yes we spend minimum time possible writing this stuff, none of us have any interest in fluff.
Thanks for the tip on the outreach – we have done work experience for various friends and family and also have offered places for sandwich course students (these have given us some of or best staff who came back when their education was finished). I hadn’t thought of including those.
No probs, like you I’ve had amazing experience with placements, work experience etc – amazed more people don’t do them – a chance for a massively extended interview in reality, time to shine etc.
Charity giving or sponsorships of anything also count, volunteering days, local youth football teams or similar. Basically all simple and sensible stuff any reasonable business is likely to get involved in at some point. I think with some of these things we can overthink it – the important thing isn’t the reporting, it’s actually contributing to society… SME’s tend to actually get that vs giant companies in my experience
The work experience stuff has been ok in that the kids we’ve had have been generally switched on and appreciative though in reality there is nothing we can give them in the way of real work as all our menial tasks have been automated long since and even a really solid developer needs weeks before they even begin to be able to work independently as it’s a complex product/business line. So it ends up being about them having a window into the world of work. The placements have been interesting – honestly they didn’t seem like they got much out of their academic work and often carried on working for us in their final year and returned to work for us when they graduated. Aptitude + learn one programming language + passion for the work = success, not sure you need a degree – learn by/while doing. Extended interview indeed. We used to run “TOPS” courses back in the day and a few people including me were recruited that way.
Yes we do payroll giving and match contributions (much better than the firm deciding who to give to).
But I would say that a firm’s “contribution to society” is really just in what that firm produces. Unless there is a coerced monopoly situation, if a firm is not “contributing to society” then they will go out of business. I remain of the view that “stakeholder capitalism” is a wrong direction.
I guess in pure business terms you are right, however in my experience good businesses in communities help sustain and grow the community, primarily through gainful employment of course, but also through creating secondary benefits for suppliers etc. It’s a huge win-win for all concerned – the danger is in keeping councils and government officials as far away as possible so they don’t stop good things happening with their paperwork!
Well yes but buying from suppliers is part of business. If an activity benefits the business in some practical way then fine but I just worry you end up trying to change the world.
This is worth reading: https://brownstone.org/articles/stakeholder-capitalism-is-an-oxymoron/
Interesting article. The mad bit is we were already successful without the governments getting involved in everything like they do now… for me keep bureaucrats as lean as possible is the main fight, because once they do, they want to gain their recognition and gold stars from all over, but have zero skin in the game re. Profit and loss
Absolutely. I recently needed to check whether we were entitled to tax relief on R&D projects, so I read through many pages of “guidance” and examples from HMRC and was broadly none the wiser. That guidance will have taken a lot of effort to produce and thousands of times more effort for people in firms everywhere to understand, people advising firms to understand, HMRC people to interpret and reinterpret every time someone makes a claim, people in firms preparing submissions to justify their claims. None of this work is productive – it all TAKES AWAY from productive work and therefore achieves the exact opposite of what it purports to.
Probably an area where it’s worth paying for some expert advice, someone who really knows their s**t and all the options – they may pay for themselves very quickly indeed
We will do this but I like to try and understand an area first so I have some idea which questions to ask and to know when an “expert” might be bullshitting me.
100%! – I’m exactly the same, always know enough to be dangerous…
Self preservation is a powerful instinct. And the bigger our “tribe” the safer we feel. So the natural tendency of a bureaucracy is to grow the bureaucracy “tribe”. In the private sector, when this gets out of hand, profitability suffers, and we often hear of companies that are in trouble reducing their managerial or admin staff. In the public sector, there is no such check on the growth of bureaucracy, and the beast needs to be fed with the invention of more regulations and more data to collect. So public sector bureaucracies will grow and grow, regulation, compliance and data collection will eat more and more into the productive sector until a way is found to tame the beast. The quickest way of course is to get rid of the regulation inventors and compliance checkers…
Back in 2008 (?) the HoL reported in the destruction of SME building firms caused by Gordon Brown’s economic crisis. It recommended steps be taken to encourage new firms.
This did not need subsidy, indeed that would be unhelpful. It required public sector buyers to use SMEs and planning permission to require their appointment for smaller sites or a proportion of bigger ones.
It would have had the incidental benefit of variety in building design.
What did the Tories do in the 14 years from 2010. Nothing.
Their benefits were elites don’t like SMEs. They like big businesses in the way the 1930s fascists did and for the same corrupt reasons.
Bigger businesses = bigger opportunities for bigger ‘incentives’ and ‘sponsorship’ etc
This started off as a fairly well-meaning and innocent initiative.
Marxo-fascist despotism starts off with a smiley face, and ends with slave-camps and mass-murder.
Meanwhile across the pond, as of tomorrow this drivel will set off on the long march to the dustbin of institutional history.
DIE must die.
I guess it’s the same in your sector as mine, where you find a couple of players who are inside the framework agreement, they take 5% for passing the business through them. It’s a complete racket.
Brilliant article, thanks.
It’s not just the public sector, many private sector organisations are also driving this through their supply chains and using the scoring with increasing signicance in weighted scoring.
Please name and shame any retail customer facing business or organisation pushing this political training and political planning so that customers can look to avoid them.