Thousands of small and medium enterprises (SMEs) across the UK will gain new opportunities from the Government’s increased defence investment, thanks to a dedicated support hub and new spending targets. The move aims to help SMEs access the defence supply chain, create jobs, and boost local economies.
New support for SMEs in defence
The Government has pledged to increase direct SME spending within the Ministry of Defence (MoD) and will set clear targets by June this year. This follows the decision to raise defence spending to 2.5% of GDP by April 2027, aiming to reach 3% in the next Parliament.
A key part of this initiative is launching a new SME support hub designed to provide guidance and unlock opportunities for smaller businesses to contribute to national defence projects. With this, the Government is encouraging family-owned firms and innovative businesses to bring agility and expertise to the sector.
Boosting jobs and economic growth
By increasing SME participation, the initiative is expected to create jobs and strengthen local economies, particularly in smaller towns and suburban areas. In 2023/24, the UK’s defence spending supported over 430,000 jobs – one in every 60 – across all regions. The MoD spent £28.8 billion with UK businesses, with notable increases in investment across the East Midlands (30%), Northern Ireland (20%), Yorkshire and the Humber (19%), and the North West (18%).
Currently, only 4% of defence spending goes to SMEs. By improving access and support, the Government hopes to significantly boost this figure, ensuring smaller businesses benefit directly from increased investment in defence.
This initiative is part of the upcoming Defence Industrial Strategy, which aims to build resilience in the UK’s defence sector and harness rapid technological advancements. By working with businesses across the UK, the new hub will help broaden supplier choices, speed up innovation, and ensure the Armed Forces have access to cutting-edge technology.
Nearly 70% of the UK’s defence spending is already directed outside London and the South East, reinforcing regional economies. With the new measures, SMEs will have a greater role in delivering key defence projects, improving the competitiveness of the UK industry and unlocking export potential.
Supporting SMEs with finance and training
The Government’s plan also includes support for SMEs in raising finance and training workers, giving businesses the confidence to expand and invest in their workforce. The initiative aligns with the Government’s broader Plan for Change, focused on strengthening the economy, creating jobs, and increasing prosperity in communities across the UK.
With increased defence investment, small businesses will play a more significant role in the future of the UK’s economic and national security. The Government’s support measures aim to ensure SMEs can thrive, drive innovation, and contribute to a stronger, more secure Britain.
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