Extensive new research from the Federation of Small Businesses (FSB) shows that 58 per cent more of the money spent by local authorities with small firms is re-spent in the local economy compared to that spent with large businesses in the same area.
The FSB and the Centre for Local Economic Strategies surveyed local authorities across the UK and found that in the last year they spent £8.7billion buying goods and services in their local area.
The findings highlight how doing business locally is better value for money as small local firms generated £746million more for the local economy compared to large local businesses – even though more than £500million less was spent with them.
The research shows that for every £1 spent with a small or medium-sized business, 63p was re-spent in the local area compared to 40p in every £1 spent with a larger business.
The FSB wants to see more local authorities using businesses in their areas to help boost growth. It believes that if each authority had spent an additional five per cent of its budget locally and committed three per cent more of that to small local firms, an additional £788million could have been generated for local economies.