Ministry issues guidance on reserving below-threshold competitions to suppliers based in local area or UK

The guidance has been published ahead of the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026 (the 2026 order) coming into force in early 2026.

The MHCLG said that the legislation, when in force, will disapply the restriction in section 17(5)(e) of the Local Government Act 1988 that previously prevented authorities from reserving below-threshold contracts by reference to the location of contractors.

“The disapplication will apply only in specific circumstances and in relation to the award of below-threshold contracts,” the Ministry said.

The guidance explains:

• how authorities may reserve competitions to suppliers based within the local area or UK
• how to define local area and supplier location
• options for reserving competitions for SME and VCSEs, either with or without the area reservation
• requirements in notices that must be published
• safeguards to ensure compliance with section 17 of the Local Government Act 1988

The MHCLG noted that while the policy is voluntary, when in-scope authorities do opt to use it, they must adhere to the provisions set out in the 2026 Order and ensure that notice requirements are followed in accordance with the Procurement Regulations 2024.

The guidance states that under Article 2 of the 2026 Order the following authorities are in-scope of the policy:

• all best value authorities in England within the meaning of section 1 of the 1999 Act to which section 17 of the 1988 Act applies, and
• all parish councils in England to which section 17 of the 1988 Act applies

“This could include joint committees that are exercising the same procurement functions for best value authorities or parish councils,” it adds.

Central government departments and their arm’s length bodies (such as executive agencies and non-departmental bodies) are not in-scope of this policy. Procurement Policy Note 005 sets out a separate below-threshold policy for those organisations.

The Cabinet Office and the MHCLG said the changes could mean that more than £1bn of potential spend is reserved each year for local and UK firms.

Chris Ward, Parliamentary Secretary at the Cabinet Office, said: “We’re changing the rules that have held back councils from investing in local businesses that are the lifeblood of local economies.

“This will put power back in the hands of our communities to drive growth, unlock skilled jobs and create local investment that rewards working people.”

Alison McGovern, Minister of State for Local Government and Homelessness at the Department for Housing, Communities and Local Government said: “We want councils to help create jobs, opportunities and growth right across the country.

“Making sure they can prioritise our brilliant local businesses is a huge step forward in achieving that, and will mean more money going to firms that know their areas best and can invest in the communities they serve.”