British technology start-ups are losing confidence in the government as a major customer after years of promises to increase public spending with domestic businesses produced limited results, according to a new report from the Startup Coalition.
The group, which represents technology start-ups and scale-ups, said Prime Minister Andy Burnham’s push to “Buy British” would need to address deep problems in the public procurement system if it is to deliver meaningful change.
The coalition described the current situation as a critical moment for British start-ups, saying successive governments had offered supportive statements but had failed to significantly change how public contracts are awarded.
Efforts to increase government spending with small and medium-sized businesses have struggled for years. Former prime minister David Cameron set a target in 2015 for one-third of central government procurement to go to SMEs by 2020.
Latest estimates from Tussell and the British Chambers of Commerce suggest SMEs received 21 percent of government procurement spending last year, the highest proportion in six years but still well below the earlier target.
The technology sector is even more concentrated. Tussell found that 84 percent of UK government technology spending last year went to just 150 companies, with most of those businesses based outside the UK.
Concerns over reliance on foreign technology have intensified as geopolitical tensions increase and governments seek greater control over strategically important technologies.
Burnham pledged in his first speech as prime minister to use public procurement to support British industry. Chancellor John Healey later said the government would “buy British not if possible, but by design” in areas including technology, defence and artificial intelligence.
The government has already changed its public procurement “social value” rules. The Cabinet Office has increased the weighting given to bids that provide local employment and other community benefits, while removing some previous incentives linked to net zero and diversity.
The threshold for applying social value criteria has also been raised to £1 million from £139,688.
The Startup Coalition said those changes could represent a potential turning point but warned that altering the wider procurement process was essential.
Start-ups say they face barriers at multiple stages, including buyers being reluctant to take risks, long delays and difficulties reaching decision-makers.
Jack Perschke, co-founder and chief executive of Great Wave AI, said companies could spend longer navigating government procurement procedures than delivering the contracts themselves.
Framework agreements are another concern. These long-term purchasing arrangements account for about 26 percent of public procurement, but start-ups say they often open only every few years and can involve complicated bidding requirements.
Rachael Crook, chief executive and co-founder of Lifted, said excessive bureaucracy could prevent smaller companies from competing fairly.
The government said it remained committed to ensuring public spending supports local communities, jobs and skills.
It said changes were intended to reduce unnecessary bureaucracy and use £90 billion in public contracts to support economic growth across the UK.
