The ScaleUp Institute’s Procurement Index shows that half of the value of public procurement contracts won by scaleups come from local authorities. Its 2019 Scaleup Survey shows that one in five scaleups sell to local or regional government and that more than one in three have aspirations to sell to government in the future. So local government is set to provide further opportunities for scaleups.

A rise in local deals

Even relatively small shifts towards local purchasing can boost local economies. For local authorities, this means ensuring that awareness of these opportunities is fully and widely communicated.

The potential to develop this further through Local Industrial Strategies, contributing to the Government’s national Industrial Strategy, offers an exciting opportunity. Led by Mayors and LEPs working with local councils, all areas of the country will soon have a Local Industrial Strategy in place to boost local productivity and support local specialisms. Looking further ahead, the Government’s promised devolution framework offers the potential for strengthened strategic leadership in our cities and counties to support scaleups.

Several Local Industrial Strategies have already been announced and demonstrate a clear focus on the scaleup agenda. For example, Buckinghamshire describes how “more needs to be done to support scaleup so that more businesses achieve their potential” and that achieving this goal is in part dependent on supporting businesses to access new markets, through more effective international trade and public sector procurement opportunities.” The West of England says it will “improve local government procurement to increase market access, in line with Scaleup Taskforce recommendations.”

The importance of building the resilience of local economies is also being reflected in the emergence of local deals.

There is the widely-reported initiative in Preston, whose efforts to localise social value impact has led to the recirculation of over £200m being spent with local suppliers as a result of the changes in procurement behaviour across anchor institutions. Wigan has launched The Deal, an informal agreement between the council and local residents and businesses to create a better borough. This includes The Deal for Business, which signifies a shared commitment to supporting the economic growth of the borough.

Devolution deals and new ways of working offer further opportunities for growth.

Developing relationships with local economic anchors

A prosperous community needs productive and profitable scaleup businesses – and such businesses need prosperous communities in which to thrive. But if Local Industrial Strategies are going to deliver local economic success, the relationship between major businesses and their ‘place’ must be renewed.

I was particularly struck by the depth and value of this symbiotic relationship when co-authoring Prosperous Communities, Productive Places, a Localis report which focused on the relationship between Gatwick Airport and West Sussex County Council and highlighted the opportunity for scaleups. To support major employers, local places must understand their supply chains and be able to act on any gaps identified. With anchor businesses reporting up to 40 per cent of their business supply chains being based locally, small increases can have a major impact on the local economy.

As a local economic anchor, Gatwick Airport is responsible for one in ten jobs between London and Brighton. In 2017 it spent £132.8m with local and regional suppliers but the supply side challenge is to increase the number and capacities of scaleups who not only can fulfill Gatwick’s requirements but also become resilient players in the region’s economic fabric.

Coast to Capital (C2C) LEP is working with the ScaleUp Institute to offer greater opportunity for local purchasing from Gatwick Airport. It aims to increase the number of medium-sized firms able to enter the supply chain, recognising scaleups amongst those with greatest potential for cluster development and to be the economic anchors of the future.

The integration of health and social care: an opportunity for scaleups

There is also huge potential for local scaling enterprises as local authorities address the challenges facing health and social services provision.

Local authorities are responsible for commissioning publicly funded social care services, including services provided to people in their own homes as well as residential care services. In 2017/18, total expenditure on adult social care by local authorities was £21.3bn. Local authorities are also responsible for commissioning many public health services from sexual health services to school nursing and addiction services. Provision of such personal services has to be local.

Any council that does not get a grip on social care could see it swallowing up at least 70 per cent of their budget, so they are all looking for solutions. With money tight, new models of care and support are needed.

Some of the more innovative local authorities are trying to turn these cost disciplines to their advantage, rethinking the way that social care in particular is being delivered. Allied to this is the commitment by NHS England to build an infrastructure for social prescribing in primary care; the drive to Universal Personalised Care will see at least 2.5 million people benefiting from personalised care by 2023/24.

The shift towards the integration of health and social services is ongoing. It opens up opportunities for individual scaling companies but also for local authorities to purchase in a different way and to transform their services.

Local government has more flexibility about its procurement. They work directly with smaller companies and are more geared to work with them. What they are procuring lends itself to the services that scaleups provide. Scaling businesses will also recognise that, as these new systems will be based on digital platforms, there is room for further digital innovation and the potential to sell more widely to other councils and care providers.

The Social Value Act should play a role here. Adding social impact considerations to public sector procurement procedures, it means that many of the organisations that will be positioned to provide such services will be social enterprises. (Manchester City Council, for example, consistently use 20 per cent social value weighting in their tendering process.) These measures should foster more scaleup opportunities.

Counties get in on the act

If local government is a more active procurer from scaleups than central government, it follows that scaleups ought to benefit from a framework of greater devolution.

In driving economic growth, all councils will want to support their local businesses. The ScaleUp Institute’s 2019 scaleup survey finds that the complexity of the procurement process and the difficulty of finding out about opportunities to bid are the top two barriers to working more with government. This may include expanding approved lists of contractors or purchasing frameworks and streamlining contracts for our scaleups and SMEs to supply, whilst ensuring all business opportunities are communicated clearly on procurement portals.

Moves are also being made to encourage and facilitate local businesses to compete for larger public sector contracts. Funding schemes like the Kent & Medway Business Fund will support expanding local companies.

“It is vital that counties get in on the act,” says David Smith, Kent County Council’s Director of Economic Development. “Scaleups are critical to local economic growth and productivity and through schemes like the Kent & Medway Business Fund providing zero cost finance for local business, we aim to expand our support.”