Public procurement, Drivers of Development for the Local Economic Base in Manchester


Fonds mondial pour le développement des villes (FMDV)

In 2012, the UK central government spent around £260 billion in procuring goods and services, with local governments spending around £70 billion (€86 billion1). In a period of drastic budget reduction by local British governments (-28% in 20122), improving the management and effectiveness of public procurement is a key strategy in optimising public spending. In 2008, the city of Manchester commissioned the Centre for Local Economic Strategies (CLES, a nonprofit research centre) to carry out a study of the impact of public procurement contracted by the city (worth an average of £300 million, or €370 million annually) on the local economy, by analysing the share reinvested in the community by the subcontractors. The findings contributed to better understanding of the local economic base, closer ties between the city and local subcontractors, and better orientation of public investment in order to support the city’s economic and social strategy, in particular for youth employment.

To download : local_innovations_to_finance_cities_and_regions10.pdf (1.5 MiB)

Manchester, a dynamic city conscious of the importance of local public procurement

A city severely affected by deindustrialisation, Manchester started developing innovative revitalisation methods from the 1980s and became a ground breaker in urban regeneration. Despite a redevelopment of the downtown area and a renewed economic vitality, social inequalities continued, and with them the need to better distribute locally produced wealth. Following the first National Procurement Strategy for Local Governments launched in 2003 by the Local Government Association (LGA), Manchester reassessed its public procurement system and its impact on the local economy by setting up a Sustainable Procurement Policy. This system consists in having public procurement spending concentrate and take root within the city in order to stimulate the latter’s economic base. The study carried out by the Centre for Local Economic Strategies (CLES) and the LM3 tool developed by the New Economic Foundation (see box) provided valuable findings for this strategy.

From findings of the study…

CLES’s impact study made it possible to analyse the evolution of public procurement in Manchester in 2008, 2010 and 2012. As recommendations were made after the first study, the later studies were able to highlight the concrete effect of measures taken. In 2008-2009, for example, the city of Manchester spent £357 million in public procurement among 300 subcontractors, 51.5% of which were based in the city of Manchester, and in 2012-2013 this percentage grew to 69.3%3. There was thus a very clear reorientation towards economic players linked to the city, thanks to a series of measures developed by the city government. It was also possible to measure the economic reach of local public procurement on the city: in 2008-2009, it came to £273 million, including city spending and the wages paid by the subcontractors to their employees living in Manchester. The catalytic impact, i.e. that which is then reinvested in the local economy by the subcontractors and their employees, is more difficult to assess but has been estimated at £687 million4. The extent to which local public procurement has taken root nevertheless varies according to the economic sector. In 2012 for example, 89.2% of utilities providers were based in the Greater Manchester area, compared to 53.5% of suppliers of office supplies or municipal vehicles (wholesale and retail trade). There is in fact a limit to supply available within a local community, and (for now) some public procurement still has to be contracted with players located outside the community.

… to actions in the field

Some easy-to-implement policies were instituted following the study, with the main objective of changing the habits of local stakeholders, so as to optimise and multiply the impacts of local public procurement on the local community.

1 CLES (2012) Progression in Procurement: Manchester City Council

2 Local Government Association (June 2012) Local Government Procurement Pledge

3 CLES (2012) Progression in Procurement: Manchester City Council

4 Manchester City Council (2010) Economy, Employment and Skills Overview and Scrutiny Committee, Item 8

To go further

Matthew Jackson (2010) “The power of procurement- Towards progressive procurement: the policy and practice of Manchester City Council” Centre for Local Economic Strategies

Description of the LM3 diagnostic by CLES