Small businesses across Britain are set to receive more than £7.4 billion a year in government spending by 2028, under new targets aimed at boosting growth and creating jobs.
Departments will, for the first time, be required to set individual spending targets for small and medium-sized enterprises (SMEs) and publish annual progress reports, with those falling short forced to explain how they will improve.
The plans build on the Government’s flagship Small Business Plan, which includes sweeping reforms to tackle late payments and a £4 billion finance boost to improve access to funding.
Spending through the Ministry of Defence will also rise sharply, with procurement from small firms increasing by £2.5 billion to £7.5 billion by May 2028.
Ministers said the reforms will “empower business to drive growth”, with billions more expected to flow to smaller firms through supply chains, in addition to direct spending.
Cabinet Office Minister, Chris Ward said: “This Government is backing SMEs and British businesses.
These ambitious spending targets will help ensure more Government contracts go to SMEs – keeping more money, jobs and opportunities in local communities. This will make a real difference – and is a statement of intent that this Government will pull every lever to support SMEs and drive growth.”
The money will go to businesses across the country, including key sectors cyber, manufacturing, finance and science.
Previous Small Medium Enterprises (SMEs) to win government contracts include UMi, based in Durham which was chosen to spearhead the Business Support Service, and Logan Construction based in the South East which has won a number of government construction contracts.
The targets will help to rebalance government spending from big international companies and put it into the pockets of hardworking communities in the UK, boosting local growth and creating new jobs.
Small Business Minister, Blair McDougall said: “These new targets will ensure thousands of smaller businesses have greater opportunity to win lucrative government contracts and grow their businesses.
“As outlined in our Plan for Small Business, increasing procurement spend with SMEs is a national priority to drive growth across the UK, and through today’s changes we are delivering on that.”
Policy Chair at the Federation of Small Businesses (FSB), Tina McKenzie said: “Understanding exactly how much central government spends directly with small businesses is essential for holding departments to account.
“The decline in direct SME spend since 2022 shows exactly why these targets matter – as well as the scale of the task ahead. It’s important that this announcement is a starting point for more ambitious future spending commitments for 2028 and beyond, particularly as overall spend among the biggest government departments like health, defence and education, is set to rise.
Chief Executive of UMi, Nicki Clark said: “The advantages of enabling SMEs to access publicly procured opportunities is well understood, so the momentum and practical change that is being created in achieving that through the new procurement act is really encouraging to see.
Chair of Constellia, Rob Levene said: “Today’s announcement marks a pivotal moment for small businesses across the UK who have felt locked out of public contracts due to cost or complexity.
“More collaboration with SMEs will ensure better value, less waste and meaningful returns for communities, ensuring Government Departments reap the multitude of benefits offered by agile and innovative SMEs.”
Targets set across government include 40% from DSIT, 33% from DCMS and 30% from Cabinet Office, with nearly half of departments setting a target of above 20%. Meaning that for every five pounds spent at least one is going directly to a small business for half of government.
Full details of the Departmental Small Business Procurement Targets are on GOV.UK.
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