More Engagement Needed With Ethnic Minority-Owned Businesses Says MSDUK

The UK government needs to engage ethnic minority-owned businesses (EMBs) more in public sector procurement, according to a new report by MSDUK.

The report, The Road to Inclusive Procurement, Promoting Supplier Diversity through Cross-Sector Engagement, available on the MSDUK website, was published last month and outlines how the government can improve inclusion of EMBs in the supply chain.

EMBs currently make up around 6 percent to 9 percent  of the SME marketplace and bring in £25 billion to £32 billion annually in revenue, according to the report. Out of MSDUK’s 320 EMB members, approximately 70 percent are located in areas with higher than average unemployment. This means that such businesses have an important role in providing employment and services to underserved communities. Increased support for these enterprises would in turn benefit deprived areas.

The report says that while there are three key policies that influence inclusive procurement, they are independent of each other. This fragmentation inhibits the positive impact the legislation aims to bring. The policies include the SME Agenda, which aims to spend 25 percent of central government procurement budget directly or indirectly with SMEs by 2015; the Equality Act, which encourages public bodies to use public procurement to improve equality across nine protected characteristics including race; and the Social Value Act, which requires public sector agencies to consider social and environmental benefits when commissioning a public service. The report recommends that government should connect these policies in implementation.

While there are plenty of support schemes available for small businesses, the report states that awareness of these schemes is very low. The BDRC Finance Monitor found that awareness was particularly low among EMBs, and that awareness of mentoring and appeals processes was also especially low. The report suggests that EMBs may draw on support less often compared to non-EMB enterprises, owing to cultural and linguistic barriers. The report recommends that there be more coordination between SMEs, support organisations and government. There should be more targeted support in going through the procurement and supplying process. However, SMEs and EMBs should also be proactive in utilising support networks to learn about procurement. EMBs should also articulate their social value in the procurement process, and the benefits they can bring.

The UK government’s Contracts Finder Website does not collect or display data on diversity of SMEs, the report says. In the United States, there is clear diversity breakdown of the supply chain and a strong supplier diversity agenda, which creates an inclusive environment for EMBs, and SMEs generally. By collecting information about ownership of SMEs, politicians can be more reactive to the needs of businesses.

Government should also clarify their expectations of the corporate sector through policy-making. Currently, only 10 percent of MSDUK corporate members have UK supplier diversity policies. By encouraging larger businesses to engage with diverse suppliers, this will promote inclusive procurement, benefitting alternative enterprises and the areas in which they are based.

First Voice

  1. Trevor Black:

    This all appears to be fine and dandy but when you look closely it is really all about spin. As 99.9% of private sector businesses are SME’s perhaps we should ask if the government means micro businesses. All this talk about encouraging trade with SME’s when the statistics confirm that is what we already do!! By all means provide guidance and support to ethnic micro businesses but most of us already engage with businesses solely on their capabilities and not on ethnicity or other statistics. More focus should be on large public sector organisations being prejudicial against small businesses particularly where there are little commercial risks. Another interesting statistic is that 75.3% of private sector businesses do not employ anyone beside the business owners!! Is there an election on it’s way?

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