Local authorities now permitted to reserve below-threshold procurements to local or UK suppliers

A new order came into force on 4 February 2026 granting local authorities broader powers to restrict participation in below-threshold procurements to specified suppliers. 

This change offers greater flexibility for authorities seeking to support local economies and UK businesses and is part of a broader package of reforms including amendments under the draft Procurement (Amendment) Regulations 2026.

The existing legal framework

Prior to the new order coming into force, local authorities were restricted in the extent to which they could consider the geographical location of suppliers when making procurement decisions.

Section 17(5) of the Local Government Act 1988 sets out a list of 'non-commercial matters' that local authorities are prohibited from considering during certain public procurement processes. These restrictions include a prohibition on considering where suppliers originate from, or the location in which contractors conduct their business activities or hold commercial interests in any country or territory (section 17(5)(e)).

Key changes under the order

The Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026 (SI 2026/94) was laid before Parliament in December 2025 and came into force on 4 February 2026.

The order disapplies section 17(5) of the Local Government Act 1988 in respect of below-threshold contracts.

Below-threshold contracts are defined in section 5(5) of the Procurement Act 2023, and the threshold amounts were recently updated under PPN 023. For example, the revised threshold for contracts for the "supply of goods, services or works to a sub-central government authority" (not including defence, utilities, light touch or concession contracts) is £207,720 (inclusive of VAT).

This change enables local authorities to make a strategic decision at the outset of a below-threshold procurement process to limit competition to suppliers that meet specific geographical criteria. In practice, relevant authorities have two distinct options:

1. UK wide reservation: Excluding only suppliers outside of the UK.
2. Local area reservation: A more targeted approach focused on limiting participation to their local area only.

Practical takeaways

Based on our experience advising local authorities, when determining which approach to take we would recommend relevant authorities consider: 

• Strategic alignment: Does limiting participation align with their broader economic, development or local industry strategies or policies adopted by the authority?  Have they made commitments to support local business or employment?

• Market capacity: A common issue we anticipate is authorities restricting competition without first assessing whether the relevant supplier market possesses sufficient capacity and capability to deliver the required goods, services or works to the necessary standard and value. Early market engagement is advisable to assess local capacity before deciding whether to reserve a procurement.

• Transparency and timing: The decision to reserve a procurement must be made and communicated to the market before tenders are invited. It is important that clear documentation and an audit trail is maintained to demonstrate compliance. 

• Value for money: The wider obligations under the Procurement Act 2023 for below-threshold contracts still apply, such as the procurement objectives under section 12. Accordingly, the relevant authority must have regard to the importance of delivering value for money and maximising public benefit when making any decision to geographically reserve a procurement.

Considerations required under the draft Procurement (Amendment) Regulations 2026 

Relevant authorities should also be aware of further transparency requirements likely coming into force soon:

• Where a below-threshold procurement has been reserved to a small or medium-sized enterprise (SME) or a voluntary, community and social enterprise (VCSE), the tender notice must state this.

• Suppliers awarded notifiable below-threshold contracts will be required to register on the Central Digital Platform (CDP) for the first time. This is intended to enable more accurate monitoring of SME and VCSE involvement in public procurement.

• New requirements will apply to publishing information regarding payments over £30,000 under section 70 of the Procurement Act 2023, enabling greater public scrutiny of spending.

These requirements are not yet in force and must first be approved by both Houses of Parliament. They are expected to come into force on different dates. We would highlight that the changes to section 70 are currently anticipated to come into force on 1 April 2026 and relevant authorities should pay close attention to this.

Next steps

Navigating these changes will require careful consideration of your authority's specific strategies and obligations. Our team is happy to assist if you would like to discuss further.