Chancellor Directs Ministers to Prioritize British Companies in Procurement
Rachel Reeves has directed cabinet colleagues to award government contracts in four vital industries exclusively to British companies, expressing frustration over the volume of government business being outsourced abroad.
In a letter obtained by , the chancellor instructs every cabinet minister responsible for spending departments to "buy British" wherever feasible, noting her disappointment that this practice is not yet widespread.
Treasury and Cabinet Office officials will now oversee billions of pounds in contracts related to shipbuilding, steel production, energy, and artificial intelligence. They will intervene if necessary to override departmental ministers' decisions.
Context and Political Implications
Reeves sent the letter last week as she sought to assert her authority within her party, amid expectations of a potential prime ministerial change in the coming months.
This development occurs against speculation about Keir Starmer's leadership, with allies of Reeves and Energy Secretary Ed Miliband advocating for their preferred candidate to assume leadership at No 11 Downing Street.
Letter Details and Government Expectations
The letter, co-signed by Cabinet Office Minister Chris Ward, states:
"We should all want to see more businesses grow and prosper and create good, skilled jobs and apprenticeships here in Britain. Every secretary of state can and must lead this agenda within their departments if we are to deliver the change the public expect."
Reeves further added:
"Therefore, it is disappointing that we are still seeing too many government contract awards where this is not happening. We have instructed officials to take further steps to ensure your departments act in the wider national interest rather than solely focusing on narrow operational priorities."
Economic Concerns Amid International Conflict
Concerns have been raised about the UK economy's vulnerability due to its dependence on imported energy, particularly in light of the ongoing conflict in Iran. Earlier this year, the International Monetary Fund warned that the UK could face one of the largest economic shocks among developed nations as a result of the war.
Specific Contract Awards and Chancellor’s Displeasure
Reeves is reportedly very dissatisfied with several high-profile contracts awarded to foreign bidders or subjected to open tender rather than being directly awarded to British contractors.
Examples include a £200 million contract awarded to the Dutch shipbuilder Damen and a £9 million deal signed with the Danish shipyard Orskov.
Additionally, the chancellor is said to be displeased that a £1.9 billion contract to upgrade the Faslane shipyard, which services Britain’s nuclear submarines, was awarded through a competitive tender process.
There is also unease regarding the possibility that offshore wind projects in the North Sea could be developed by the Chinese company Mingyang.
Union Reactions and Government Perspectives
Some of these decisions have sparked protests from major British unions. Louise Gilmour, secretary of GMB Scotland, commented on the Faslane contract:
"It is hard to imagine another country in the world being so willing to send such work abroad … It is beyond time the MoD started defending our workers and their communities."
Conversely, some government officials argue that competitive bidding ensures the UK obtains the best products at the lowest cost. They caution that awarding contracts directly to preferred companies could increase expenses for British taxpayers.
Aides to Defence Secretary Richard Healey emphasize his commitment to domestic procurement, noting that he recently announced a £1.5 billion package to support British defence firms' growth.
They also clarify that the Faslane contract has not yet been finalized and that the £200 million naval support vessels contract was actually awarded by Serco, the prime contractor.
UK Research and Innovation defended the Orskov contract, stating it resulted from a thorough competitive bidding process.
Chancellor’s Concerns and National Security Implications
Allies of the chancellor indicate her frustration is not aimed at individual ministers but at the "inertia" among civil servants who prioritize cost over the nationality of contractors.
They warn that awarding contracts to foreign companies could undermine British national security, especially in the energy sector, where experts have expressed concern about potential Chinese control over critical infrastructure.
In March, Minister Chris Ward announced plans to issue guidance clarifying that national security considerations should influence procurement decisions.
Ministers argue that such guidance will enable departments to award contracts directly to companies in key industries without competitive bidding.
Under the 2023 Procurement Act, ministers have the authority to exclude companies from bidding on contracts if they pose national security risks.
However, government insiders acknowledge that previous guidance has not sufficiently altered Whitehall’s procurement practices and hope Reeves’ letter will accelerate policy implementation.
Future Oversight and Accountability Measures
In her letter, Reeves pledged to issue additional guidelines to government accounting officers, instructing them to consider contractors’ nationality alongside costs.
She warned:
"We look forward to confirmation that your departments are complying with the new guidance when it is issued later this summer. Each department will be held to account on the progress being made."
Government sources indicated that the Cabinet Office will review individual contracting decisions and may "call in" contracts of concern, potentially overriding departmental choices.
Political Activity and Recent Developments
The letter was sent amid a surge of activity by the chancellor, whose supporters are openly campaigning for her to remain in office if Keir Starmer is replaced by Andy Burnham, currently a candidate for MP of Makerfield.
In recent days, Reeves has announced a series of measures to support economic growth, engaged in political debates, and launched her own TikTok account.
The Treasury and Cabinet Office have been contacted for comment.
