SNP ministers are looking at changing the way councils award contracts to stop them trading with Russia and Belarus in light of the war in Ukraine.

The Scottish Government today issued guidance to quangoes and other public bodies on how to halt contract bids from companies linked to the two pariah nations.

However the law currently prevents local authorities from doing likewise.

A value for money provision in the 1988 Local Government Act prohibits councils from taking “non-commercial considerations” into account, including a supplier’s location.

The legislation stops councils steering orders towards local firms for political reasons, but would also stop them from turning down cheap bids from Russia or Belarus.

The Government's guidance admits: “This means that local authorities are unlikely to be able to either reject bids from companies by reason of being established in Russia or Belarus, or to terminate existing contracts on that basis [location]. 

“The Scottish Government is exploring options in this area.”

Councils account for around two-thirds of Scotland’s £13billion-a-year procurement spend.

The problem has come to light as the Government tries to crack down on trade with Russia and its autocratic neighbour Belarus, which has been used as a base for attacking Ukraine.

To help strengthen economic sanctions imposed after the invasion of Ukraine, public bodies are being advised on rejecting contract bids for goods or services from Russia and Belarus.

Public bodies are also being encouraged to terminate contracts early, including property contracts.

This also applies to companies with substantial business operations in Russia, as well as those under the control of a person with links to the Russian regime.

Because neither Russia nor Belarus is a signatory to the World trade Organisation’s agreement on government procurement, companies established in those countries are not owed a duty of equal treatment in relation to public contracts in Scotland.

Excluding firms with substantive business operations in the UK is harder, however public bodies may be able to get round this by taking into account whether a supplier’s links to operations in Russia or Belarus would affect its ability to deliver on a particular contract.

SNP business Minister Ivan McKee said: “The Scottish Government has been clear since the beginning of the illegal invasion of Ukraine, that the business community has a moral responsibility to take economic action by reviewing operations for links and connections to Russia – and severing them where it is possible to do so.

“While it is up to the contracting authority as decision-maker to make an informed, rounded, case-specific assessment, this guidance will ensure public bodies can exclude companies from new contracts, or terminate existing ones, if the bidder has connections to the Russian regime.”

A public body is defined as an organisation that is publicly funded to deliver a public or government service.