Councils can now favour local suppliers: most of them just don't know it yet

For most of its history, UK public procurement law has been quite firm on one point: councils cannot give preference to local suppliers just because they're local. Section 17 of the Local Government Act 1988 explicitly prohibited it. A buyer in Manchester couldn't choose a Manchester-based company over a London one simply on the grounds of geography.

That changed in February 2026.

The Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026 came into force on 4 February, giving local authorities in England a new optional power to reserve below threshold competitions to local or UK-based suppliers, including SMEs and VCSEs.

This is a bigger deal than it sounds.

What "below threshold" actually means

Below-threshold refers to contracts that fall under the formal procurement thresholds set out in the Procurement Act 2023. For goods and services, that threshold currently sits at around £213,000. Anything below that doesn't require a full advertised competition. There's a lot of it.

Local government spending below these thresholds runs into billions of pounds annually. It covers everything from catering and cleaning to community services, maintenance, consultancy and care. Much of it is awarded relatively informally, through quotation exercises or simply from established supplier lists.

This is the market that just became more accessible for local businesses.

What the new power actually allows

Under the 2026 Order, councils can now choose to restrict a below threshold competition to:

• Suppliers based in their local area (or a bordering area)
• UK-based suppliers more broadly
• SMEs and VCSEs specifically

These can be used individually or in combination. A council could, for example, run a below threshold exercise open only to local SMEs or only to VCSEs delivering services in the area. The power is discretionary. Councils don't have to use it, but where they do they must state which reservation they're relying on in any advertisement.

Why most of the market hasn't noticed

The honest answer is that this change arrived quietly. It didn't come attached to a major government announcement or a new procurement framework. It was a statutory instrument, the kind of change that tends to land in legal newsletters rather than the general business press.

Most councils are still working out whether and how to use the power. Some will embrace it quickly, particularly those with a strong local economic development agenda. Others will take longer, partly out of caution about how to apply it correctly, and partly because procurement teams are already stretched.

That means there's a window right now where getting to know your local buying teams, before formal competitions are advertised, could make a material difference to whether you're considered at all.

What to do with this information

If you're a small business or charity delivering services to your local community, the practical steps are straightforward.

Start with your council's website and look for any supplier registration schemes, approved vendor lists, or procurement portals. Register if you haven't already. These lists are often how below threshold contracts get awarded: a council will contact two or three known suppliers for quotes rather than advertising openly.

Then make contact with the relevant procurement or commissioning team. Not to pitch, but to introduce your organisation, understand their upcoming needs, and make sure they know you exist. This kind of relationship-building used to feel like it didn't count for much in formal procurement. Below-threshold, it always has mattered. Now there's a legal framework that actively supports buyers acting on it.

Finally, keep an eye on below threshold notices published on Find a Tender and your council's own transparency pages. Some authorities will start advertising reserved competitions as a matter of good practice, and those advertisements will tell you exactly which reservation applies.

The bigger picture

The 2026 Order is part of a broader shift in public procurement towards supporting local economic growth and diversifying the supplier base. The government's ambition to channel over £7.4 billion a year to SMEs by 2028 doesn't happen by accident. It requires buyers to actively look beyond their established suppliers.

This is one of the mechanisms that makes that possible. The organisations that understand it early are the ones most likely to benefit.