Large contractors commissioned to help the long-term unemployed into jobs are squeezing out smaller providers in local areas, according to early findings in a government-commissioned review.

Stephen Houghton, leader of Barnsley Metropolitan Borough Council and a member of a government-appointed team set up to look into how to tackle unemployment, told Regeneration & Renewal that the Government’s changes to procurement practices are “making it more difficult for local authorities to find smaller providers” to carry out services.

Under new welfare-to-work reforms, private and third sector agencies are commissioned and paid by results to get the long-term unemployed into jobs. “Prime contractors” – essentially big management firms – bid for large-scale Department for Work and Pensions contracts, and then contract delivery down to smaller, more specialist organisations.

But Houghton said that small, local groups with links to the most disadvantaged and hard-to-reach communities are being squeezed out.

He added that councils are beginning to use the Working Neighbourhoods Fund (WNF) to fund back-to-work schemes. But he said that, as it has only been live for six months, it would be “more useful to look at it in 12 months”.

The team is looking at how 12 local authority areas are spending the WNF. The interim report will be given to ministers in the “next few weeks”, said Houghton.