New EU rules on public sector procurement will potentially open up a huge market for small and medium enterprises (SMEs).

Changes to the bidding process are expected to reduce admin costs by up to 80%, making it cheaper for smaller businesses to obtain public sector contracts.

Public sector authorities will also be encouraged to divide contracts into smaller lots, allowing a wider range of companies to compete.

The revised Procurement Directives aim to encourage transparent, fair and competitive procurement across all EU Member States.

Francis Maude, Cabinet Office minister, said:

“This is a big boost for all small and medium-sized enterprises and all bidders to make it cheaper and quicker with less red tape.”

The UK has played a large part in influencing the Directive and plans to adopt the new rules far ahead of the mandatory two year schedule.

The changes will make it easier for governments to outsource services such as healthcare, social care and education more quickly, which has led to some concerns.

Dr Louise Irvine, Deptford GP and chair of Save Lewisham Hospital campaign group, said:

“This will speed up the process, which is already gaining pace, of privatising NHS services.”