CBI calls for greater public procurement of goods and services if UK is to cash in on export potential

PUBLIC procurement of goods and services in 12 key emerging markets will almost triple to £452bn by 2030, according to new research by the CBI.

However, the business body concludes that the UK will only capture £11bn of this growth if its market share stays the same.

The CBI said procurement from overseas by developing countries has historically focused on sectors with no domestic equivalent, while other contracts have tended to go to domestic companies or public bodies.

However, it said its research suggested that public sector organisations in these countries would rapidly increase their purchase of goods and services, driven by the needs of ageing populations and a growing middle class.

China will lead the growth in public procurement with its market increasing by 7.4% each year. Indonesia and Turkey will also rapidly increase their spending by 6.2% and 6% respectively.

The research also found the demand for services would grow at the fastest rate, by 6.1% each year, and be worth £110bn in 2030. Construction will grow by 5.9% each year and be worth £97bn in 2030, while manufacturing will remain by far the largest component with demand reaching £242bn by 2030, growing at a rate of 5% each year.

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

Among the measures the CBI is recommending to tap into this growth are the establishment of UK Government contracting agencies.

It is also calling 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.

“To boost opportunities for our exporters, we want the UK Government to set up contracting agencies with priority markets, to help them navigate the procurement maze. We also want the EU-US trade talks to prioritise public procurement.”

She said politicians had to guard against using rhetoric which could damage the reputation of the UK public services industry overseas and Ministers needed to champion the importance of the economic sector to a point where CEOs of public services firms are just as readily invited on trade missions as manufacturers.

The CBI research shows that the UK has a strong track record in many of these growth areas but without Government and EU support it will miss out on market share.

The 14 key emerging markets examined in the report were: Brazil, China, India, South Korea, Turkey, Saudi Arabia, Indonesia, Mexico, Poland, Ukraine, Malaysia, United Arab Emirates, South Africa and Nigeria.