UK to miss out on overseas public sector procurement growth, warns CBI

Wrong-WayPublic procurement of goods and services in twelve key emerging markets will almost triple to £452 billion by 2030, according to new research from the Confederation of British Industry. But the report warns that UK will only capture £11 billion of this growth, if its current market share stays the same so the UK needs to do far more to capture a higher share of the extensive growth in global public procurement in emerging markets. The procurement of goods and services in key emerging markets will soar to £452bn by 2030 as public sector organisations in rapidly developing countries increase their procurement of goods and services, driven by the needs of aging populations and a growing middle class. China will lead the growth in public sector procurement with its market increasing by 7.4 percent each year. Indonesia and Turkey will also rapidly increase their spending by 6.2 percent and 6 percent respectively.

The three fastest growing areas of overseas procurement spend will be: health infrastructure (predicted to increase by 351 percent by 2030), transport services (254 percent) and recycling equipment (250 percent).

The CBI is recommending the establishment of UK government contracting agencies and also calls on the government to support UK public services firms, including through overseas trade missions, and to stop using rhetoric which could damage the sector’s reputation.

Katja Hall, CBI Chief Policy Director, said: “The size of the exports prize for public services firms in emerging markets is growing at a rate of knots, driven by a ballooning middle class and an ageing population.

“This is a huge opportunity for UK businesses, which have an established track record in many key growth areas like health, transport and recycling. But winning public contracts in these countries is often an uphill battle, so firms need a leg up.”

The CBI is calling for overseas public procurement markets to be open to foreign bidders:

1. The EU should proactively promote more ambitious commitments under the Agreement on Government Procurement (GPA) with more trading partners

2. The EU/US free trade negotiation should include public procurement as a priority

3. The EU should not seek to use retaliatory measures to open procurement markets

The benefits of overseas public procurement markets need to be visible to UK companies:

4. The UK government should establish contracting agencies within priority markets

5. UKTI should closely monitor the impact of its new sector agencies, and explore the case for extending the model into other areas of UK exporting strength