The UK government has announced new measures to increase small and medium enterprise (SME) involvement in defence contracts, following its commitment to raise defence spending to 2.5% of GDP by April 2027. A new hub will be launched to improve SME access to the defence supply chain, and the Ministry of Defence (MoD) will introduce direct SME spending targets by June.
Currently, nearly 70% of defence spending goes to businesses outside London and the South East, but only 4% reached SMEs in 2023-24. The new hub aims to address this gap by working with suppliers across the UK to increase procurement opportunities for smaller firms, enhance competition, and accelerate innovation.
Defence spending supported over 430,000 UK jobs last year, with government contracts injecting £28.8 billion into UK industry. Regional spending increases included a 30% rise in the East Midlands (£328 million), 20% in Northern Ireland, and nearly 19% in Yorkshire and the Humber. The government says expanding SME participation will drive further economic growth, create jobs, and strengthen the UK’s defence industrial base ahead of the upcoming Defence Industrial Strategy.
