02 November 2006 | Paul Snell

The EU should opt-out of an agreement that prevents it guaranteeing SMEs a percentage of government contracts.

The UK's Forum of Private Business (FPB) is calling on Brussels to free itself of the World Trade Organisation's (WTO) 'Government Procurement Agreement'.

Rejecting the proposal would allow EU member states to set quotas for the amount of work awarded to small businesses, which is not permitted by the agreement.

In order to opt-out, EU trade commissioner Peter Mandelson must submit a proposal to the WTO on behalf of the EU by this month.

But he will only do so if a 'qualified majority' of member states are in favour. Martin Smith, Brussels representative for the FPB, told SM: "We have 15 states on side, but a qualified majority needs more."

Each member has a fixed number of votes weighted by the size of its population. The EU's next opportunity to forego the WTO agreement will not be until 2016.

The US, Canada, Japan and South Korea all opt-out, allowing them to award a set proportion of government contracts to small businesses.

The FPB said public sector contracts are currently "completely unattractive" to SMEs because of the time it takes to tender and the requirement to have three years of accounts.

Conservative leader David Cameron boosted the campaign last month by pledging that a Tory administration would ensure 25 per cent of government contracts are awarded to SMEs. But unless the opt-out goes ahead, his vow will be irrelevant.

Cameron also promised to develop a small business procurement policy before the next election.

SMnov2006