The impact of Brexit on UK’s £200bn public procurement spend
Campaigners in favour of leaving the EU have claimed that not having to apply EU procurement rules would enable the UK to save £1.6bn a year in procurement costs.
But what are the facts? What impact would a vote to leave the EU have on the UK’s £200bn annual public procurement spend?
In the event of Brexit, the UK would either have to retain the EU directive or introduce something similar
The EU procurement directive covers all public sector procurement in member states. It defines processes, procedures and standards and is intended to ensure that all EU businesses stand a fair chance of obtaining public sector contracts in any EU country. It has been introduced formally into UK law through parliamentary legislation and through the Scottish assembly, so a Brexit vote on 23 June would only change procurement law if the Westminster parliament or the Scottish assembly chose to do so.
All large businesses require a clear set of procurement procedures and processes. These help protect against fraud, satisfy corporate governance requirements, ensure suitable competition to deliver value for money and mean suppliers understand the rules of the game and can be confident that they will be treated fairly. The same applies to governments.
Public sector corruption deters private investment, misallocates resources and generates social grievances. Transparency International’s corruption league table demonstrates that countries with the best reputations have robust procurement legislation. Most of the top 20, out of 167 nations, apply the EU procedures and others have equally robust procedures. At the bottom end of the scale are North Korea, Somalia and Afghanistan.
Good quality public procurement legislation is complex. Public sector organisations work with businesses that operate globally and procure products and services on a bigger and more complex scale than almost anything the private sector procures. Both the public and suppliers need to know that the UK’s £200bn spend is managed fairly.
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Outsourcing prisons, for example, is complex and the cost of letting a poor contract can be immense. At the other end of the scale, there is no reason for procurement procedures not to be simple and timescales short, particularly for small businesses. But, as the Commons communities and local government select committee has pointed out, the UK often operates its public procurement in an unnecessarily bureaucratic way, with a lack of consistency in the way regulations are implemented that means tendering costs are typically higher in the UK than in other EU member states.
In the event of Brexit, the UK would either have to retain the EU directive or introduce something similar. In practice, if the UK wished to continue to trade with the EU on preferential terms, like the European Free Trade Agreement nations, such as Norway or Switzerland, part of the price would be continuing to adhere to the EU procurement laws. Changing UK legislation would be complex and time consuming due to the number of public sector and industry bodies with which consultation would be required.
Moreover, the UK was very influential in the drafting of the latest procurement directive, so it largely meets UK requirements. Replacing it would be a low priority for any government. There are many ways that public procurement can save £1.6bn a year. Abandoning the EU procurement directive is not one of them.