Amazon advances on Britain’s public sector

Governor Hogan Tours Amazon Fulfillment Center by Joe Andrucyk at 2010 Broening Hwy, Baltimore MD 21224

News this week that Amazon has signed a five-year deal with the Yorkshire Purchasing Organisation is deeply troubling.

The £600m deal will see the multinational corporation provide a one-stop-shop for public bodies across Yorkshire; providing everything from paper clips to bandages to the schools, social care providers and emergency services in the 13 local authority areas impacted by the deal.

Days after the US company posted a record profit of $2.5bn (£1.9bn) in its most recent quarter, Amazon, today revealed that its UK corporation tax bill almost halved to £4.5m last year. Meanwhile, stories of Amazon’s callous attitudes towards its staff persist, with latest reports claiming that drivers for Amazon are apparently urinating in bottles as they struggle to deliver 200 parcels a day.

Moral objections notwithstanding, dealing with Amazon alone may, on the face of it, sound like good housekeeping. Why? Because, the claim is that it will drive down the cost of goods by replacing a more complicated procurement system that involves numerous suppliers.

Unfortunately, it also frustrates the attempts of a number of progressive local authorities and public bodies across the country who are committed to building a more inclusive economy. From Birmingham to Preston and Southampton to Kirklees, these local administrations are part of the growing movement that is committed to the principles of local wealth building, which champions the use of local supply chains as a means of generating and spreading wealth within communities.

Who has wealth, who influences its flow, and who benefits from it are defining features of all economies. Traditional economic development policy is too often focused on short-sighted measures which leads to profits and dividends being extracted out of the local economy by investors and share-holders, at the cost of local economies and people.

When a company like Amazon is chosen over a local supplier this is precisely what happens. Wealth ends up in the pockets of distant shareholders. Conversely, when a local supplier is used, wealth flows back through the local economy, generating more income for local people. More income retained locally means more jobs, higher pay and more tax revenue for government, all of which lead to a better quality of life for local people.

Furthermore, contrary to some multinational organisations, local businesses aren’t typically domiciled in tax havens, and they won’t pack up and move their business to another area if their employees demand a real living wage. When you buy from local businesses, you’re not helping a CEO buy a third holiday home – you’re helping local people to have a meaningful stake in their local economy.

When Preston hit rock bottom in 2011, after its city masterplan based on inward investment fell apart, it responded to the effects of the financial crash and austerity with a commitment to make the economy work for everybody. A significant part of this commitment involved redirecting the council’s spend towards local suppliers, placing less emphasis on cost considerations alone and more emphasis on their social value. Working with the Centre for Local Economic Strategies (CLES), the council has modified its approach to procurement and helped to build the capacity of local suppliers, enabling them to be more competitive in bidding for council contracts. This approach has helped to inject over £70 million back into the Preston city area and £200 million back into the Lancashire economy.

With news this week that Northamptonshire county council faces catastrophic financial collapse and with numerous other councils continuing to feel the brutal effects of the last 8 years’ austerity measures, we urge local authorities to adopt the principles of local wealth building, rather than be lured by Amazon’s current assault on Britain’s public sector procurement market. This strategy will ensure that money that flows through our local economies benefits local people and places, instead of leaking out into shareholders pockets.