A significantly larger proportion of the money spent by local authorities with small businesses is re-invested back into the local economy, extensive research by the Federation of Small Businesses (FSB) has found.
Looking into the spending habits of local authorities across the UK, the study in collaboration with the Centre for Local Economic Strategies found local authorities spent a total of £8.7 billion buying goods in their local areas last year.
Of this, 63p out of every £1 spent with a small or medium sized business was re-spent in the local area, compared to 40p in every £1 spent with larger businesses.
It translates to smaller firms generating £746 million more for the local economy compared to large local businesses – despite £500 million less being spent with them.
John Allan, national chairman of the FSB, said: “This report shows the power and strength of small firms to create jobs and growth in the local economy if they are given the help to do so. With budgets being cut there seems to be an increasing realisation that spending more locally will benefit the local economy. The evidence speaks for itself. Spending locally invests in jobs and growth for the area. We want to see more of this happening across the country.”
The FSB is calling for more local authorities to use small businesses in their immediate areas to help boost local economic growth.