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How Government contracts are helping drive the private sector

05/09/16


The Government has just announced that train maker Bombardier has been awarded a £1 billion contract to build 660 new carriages for the East Anglican rail network at their plant in Derby. The sizable government contract is welcome news for the area, as it will safeguard 1,000 highly skilled jobs at the 140 year old site while also providing a boost to the local economy.

The landmark contract was announced alongside the news that the Dutch company Abellio has won an extension on its contract to run services on the route until 2025. For its part, Abellio has pledged to invest £1.4 billion to improve services between London’s Liverpool Street and stations in the east of England.

Bombardier is the last company in the UK that both designs and manufactures trains. The significance of this investment cannot be overplayed. The Department for Transport called it one of the biggest ever orders for British-built trains while Transport Secretary Chris Grayling said: “We are making the biggest investment in the railways since the Victorian era.” He added that the investment will secure the plants future into the next decade and that it will ensure that the train building industry in Derby remains strong.

He added:  “This is part of our plan to make an economy that works for everyone – not just the privileged few – by ensuring prosperity is spread throughout the country.” Des McKeon, UK commercial director at Bombardier Transportation, called the deal a "great endorsement" of its trains.

Increasing private sector turnover and safeguarding jobs

The Bombardier deal marks the first major contract that the new Government has awarded since Theresa May became Prime Minister and is a clear signal of intent going forward. Competition for hefty government contracts for the private sector are nothing new however and have been a cornerstone this administrations of economic policy.


Just last month it announced that it will buy nine new maritime patrol planes from Boeing in a deal worth £3 billion. The deal is expected to create 2,000 new jobs in the UK in the coming years with Boeing planning to build a new £100m facility for the planes at RAF Lossiemouth in Moray.

Other major deals were struck that week in Farnborough including a £60 million deal with Farnborough Engines Ltd to build a Sabre rocket engine for space exploration. Meanwhile government investment and lucrative government contracts have helped the automotive industry to turnover a record £71.6 billion in 2015.

The Government’s partnership with the automotive industry, the Automotive Investment Organisation (AIO), has attracted more than £1 billion in foreign investment into the UK car industry since it was set up in 2013. In that time it has created or protected 15,000 jobs in the industry, and supported over 250 projects.

The AIO has created a network of industry specialists and government expertise, resulting in a number of contracts being awarded to UK based component manufacturers. As a result the amount of British-made components being used by car manufacturers in the UK was 41% in 2015 – an increase of 5% on the previous five years.


Helping small and medium enterprises win government tenders

While multi-billion pound deals attract news headlines, it isn’t just large manufacturing companies who compete for government tenders. Smaller organisations such as food producers, small building contractors and service providers also benefit from the guarantees and security that comes with government contracts.

Last month Emma Jones MBE, the founder of Enterprise Nation, was appointed to the newly created position of Small Business Crown Representative. The role will involve her working with government departments and the Crown Commercial Service, to help small businesses in the UK bid for and win lucrative government contracts.

The role has been created to support the Government’s election manifesto pledge to spend £1 in every £3 with SMEs by 2020. Ms Jones will also be responsible for raising awareness of the value that small businesses bring to the table. 

Already there are signs that the Government’s commitment to spending on SMEs is having a positive effect. Last week the public sector procurement group Scape appointed a consortium of firms to deliver £350 million of government contracts. Called Perfect Circle, the consortium is made up of Pick Everard, Gleeds and Aecom. The three consultancy firms will oversee a supply chain of approximately 150 SMEs as well as creating opportunities for micro-businesses. 

Lucrative government contracts are always welcome news for businesses large and small. Their impact on the private sector has in no small part helped to deliver record numbers of people in employment and provided long term growth opportunities for UK businesses.
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