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New research led by a ��ɫ��Ƶ academic has found that prioritising local businesses in matters of procurement does not result in higher costs for communities.

In the study, titled ‘’, Dr Vincent O’Sullivan, Associate Professor in the Department of Economics ��ɫ��Ƶ's Kemmy Business School, and his co-authors examined whether procuring locally leads to higher costs in the community.

As part of the research, recently published in the Annals of Public and Cooperative Economics, and the research team examined the concept of Community Wealth Building (CWB) Initiatives – an approach to economic development by which social value to the economy is considered in the procurement process, with the chief aim of maximising returns to the community. 

With CWB implemented in areas of the USA, Canada, and the UK over the past 15 years, Dr O’Sullivan and his co-authors chose to examine the model specifically adopted by Preston City Council in England, to explore whether prioritising local procurement led to increased costs for the community. As part of their research, the team compared contracts awarded to local and non-local suppliers, by Preston, a group of smaller local authorities, and all lower-tier authorities in England.

“We compared Preston, an exemplar of the Community Wealth Building model, which has been at the forefront of this approach since 2012, to similar local authorities in England … We also looked at a massive sample of local authority procurement contracts in England made in the last decade,” explained Dr O’Sullivan.

The study, chiefly funded by the National Institute for Health Research (NIHR) Public Health Research programme, indicated that local procurement does not necessarily increase costs. According to the findings, contracts with local suppliers usually have lower total costs and, additionally, might help to support smaller local businesses.

"Economists are normally very sceptical of policies to encourage local purchasing because it could be a bad deal for taxpayers and consumers. However, our study suggests that a local government procurement policy that takes the local economy into consideration, such as local employment and investment, alongside the price of the contracted good or service, isn't necessarily a bad deal for taxpayers,” explained Dr O’Sullivan.

“We found that contracts awarded to local businesses and organisations were, if anything, cheaper on average than non-local contracts, even when we statistically controlled for the characteristics of the local authority and the good/service being contracted.”

While the study found that the CWB model may pose challenges related to a limited supplier pool, lower capacity, and occasional creditworthiness concerns; the research showed that leveraging local supplier may offer significant advantages such as stimulating the local economy, potential cost savings, and shorter contract durations.

“These results are encouraging for model of local economic development which aim to increase the share of local communities' share of the local economy,” said Dr O’Sullivan.