Policy paper

Defra's small and medium-sized enterprise (SME) action plan: 2025 to 2026

Published 24 March 2026

How we are backing your business

Through Backing your business: our plan for small and medium-sized businesses, we are delivering the most comprehensive package of support for small and medium-sized enterprises (SMEs) in a generation.

Growth is this government’s number one mission and SMEs are the engine room. Our plan is to make the UK the best place to start and grow a business, with a culture that supports entrepreneurship in every community and high street.

We’re delivering:

• the most significant legislation to tackle late payments in over 25 years, giving the UK the strongest legal framework on late payments in the G7
• a new Business Growth Service to simplify finding advice and support, including a new streamlined digital offer – Business.gov.uk, ending the chop and change of previous government business support programmes
• a package of support tailored to high streets to make it easier for SMEs to set up shop, ranging from a new licensing framework to targeted funding for places
• a massive £4 billion finance boost to increase access to finance for entrepreneurs – to inspire the next generation of small business owners, make the UK the best place to start and grow a business, and build a culture that celebrates and champions entrepreneurs

We also committed to making SMEs a national priority, ensuring they have a fair opportunity to win public contracts and setting ambitious SME targets for each department. Each departmental SME action plan sets the steps government departments are taking to maximise SME and start-up spend across their department and wider agencies. These plans also include departmental targets for direct spend with SMEs and the actions being taken to remove and reduce barriers to SMEs bidding for government contracts.

The Procurement Act 2023 creates a more simple and transparent procurement regime, making it easier for SMEs to do business with the government. This action plan sets out why SMEs should work with us, where to find opportunities, and the actions we are taking to reduce barriers for SMEs in bidding for work.

The plan is monitored through an annual publication (as a minimum) of our direct spend with SMEs as a percentage of our total procurement spend.

SMEs are suppliers that have fewer than 250 staff, and have a turnover of an amount less than or equal to £44 million or a balance sheet total of an amount less than or equal to £38 million. For more information, see Clause 123 of the Procurement Act 2023.

Foreword

I am proud to champion Defra’s SME Action Plan, which reflects our commitment to driving economic growth and fostering innovation across the UK. At Defra, we recognise that SMEs are not only the backbone of the UK economy, making up 99% of UK businesses, but also a vital source of creativity, agility, and specialist expertise that help us deliver on our strategic objectives.

As a major buyer of goods, services, and works, Defra understands the critical role SMEs play in building a competitive and resilient supply chain. By working with SMEs, both directly and through our tier 1 suppliers, we can unlock innovation, improve value for money, and strengthen economic opportunities across the country. This approach supports the government’s mission to boost productivity and growth by ensuring diverse and dynamic markets.

Defra, alongside all central government departments, is committed to diversifying supply chains and awarding contracts based not only on value for money but also on social impact. SMEs are central to these commitments, helping us deliver sustainable outcomes and wider economic benefits.

This plan sets out how we will engage SMEs throughout our commercial activities, providing access to the varied markets required to achieve our departmental goals. We will take proactive steps to remove barriers and create opportunities for SMEs to thrive as suppliers to Defra.

To ensure progress, we have established clear goals and will report annually on performance. Defra’s SME Champion will oversee delivery to maintain momentum and accelerate action. In addition, we will continue working closely with strategic suppliers to leverage our collective influence in supporting SMEs within their supply chains.

Baroness Hayman of Ullock, Parliamentary Under-Secretary of State, Minister for Biosecurity, Borders, and Animal Welfare

I am pleased to introduce Defra’s SME Action Plan for 2025–26. This plan demonstrates our clear commitment to supporting small and medium-sized enterprises as a vital engine of economic growth and innovation. SMEs play a critical role in delivering the specialist skills and creativity needed to achieve Defra’s objectives and the government’s wider ambitions for productivity and prosperity.

As one of government’s significant buyers, Defra is determined to create a level playing field for SMEs by improving visibility of opportunities, simplifying processes, and embedding social value in our procurement decisions. We will continue to work proactively to remove barriers to participation and strengthen supply chain diversity, ensuring SMEs can thrive both as direct suppliers and through our strategic partners.

This action plan sets out practical steps to increase engagement, enhance transparency, and deliver measurable progress. By working together, we can unlock innovation, deliver better value for money, and contribute to a stronger, more resilient economy.

Einav Ben-Yehuda, Chief Commercial Officer

Department overview

Defra is the United Kingdom’s government department with responsibility for safeguarding our natural environment, supporting our world-leading food and farming industry and sustaining a thriving rural economy. We are here to make our air purer, our water cleaner, our land greener, and our food more sustainable. Our mission is to restore and enhance the environment for the next generation, leaving it in a better state than we found it. We also recognise our food, farming and fishing industries include many SMEs and voluntary, community and social enterprise (VCSE) organisations. 

The Defra group has around 31,000 staff. Although the Defra group only works directly in England, it works closely with the devolved administrations in Wales, Scotland, and Northern Ireland, and leads on negotiations with the EU and internationally. Read more about us and what we do.

Our priority outcomes include:

• improving the environment through cleaner air and water, minimised waste, and thriving wildlife
• reducing greenhouse gas emissions to help deliver net zero
• reducing the likelihood and impact of flooding and coastal erosion, and
• increasing the sustainability, productivity and resilience of the agriculture, fishing, food and drink sectors.

Defra group Commercial work with and provide commercial advice and services for several Arm’s Length Bodies that are part of the wider Defra group:

• Animal & Plant Health Agency (APHA)
• Environment Agency
• Marine Management Organisation (MMO)
• Natural England
• Rural Payments Agency (RPA)

Why SMEs should work with us

This action plan sets out how the Defra group will enable SMEs to work with our department. It supplements statements made in Defra’s Outcome Delivery Plan and is one aspect of Defra’s wider sustainable procurement approach which also includes supporting supplier diversity and embedding social value.

Defra group’s nominated SME champion is the Defra group Commercial Head of Supplier Relationship Management. They are responsible for ensuring that the opportunities for SMEs in the commercial activity undertaken by the group are clearly communicated and any barriers faced are addressed. The SME champion is committed to working closely with the category teams and supplier managers across the Defra group to assess and support them in ensuring SMEs have access to opportunities in our future pipeline and through our strategic suppliers’ own supply chains.

The Defra group buys a range of goods, services, and works which are detailed under the category headings below.

What we buy

The Defra group buys a wide range of goods, services and works, including:

• Buildings related services and purchases, including Facilities Management, construction, works and related professional services across the Estate
• Corporate services related purchases, including professional services such as management consultancy, finance and legal services, workforce and recruitment, and corporate solutions such as travel services, conferencing and events, marketing services, postal goods and services, office supplies, vehicle lease and fleet management, insurance and related services and occupational health and employee assistance;
• Environmental goods and services related purchases, including evidence, research, and environmental equipment, environmental surveying, monitoring, research, and services, land use and biodiversity technical services, expert advice and associated operational services, veterinary, animal, plant and laboratory goods and services, disease prevention and control services, laboratory consumables, equipment, maintenance services and testing services;
• Purchases and grants supporting our major programmes, including land-based grants and related services such as the Nature for Climate Fund (NCF), marine-based grants and related services such as the UK Seafood Fund and the Fisheries Fund, and Official Development Assistance (ODA) services and related grants supporting international programmes;
• Infrastructure and construction related purchases, such as regional flood and coastal defences, including related design and build contracts and supporting professional services, and civil engineering and operational maintenance for flood and coastal defences;
• Purchases relating to the National Biosecurity Centre programme, including high containment works for complex building structures (typically greater than £20 million), enabling and infrastructure works, across a secure and operationally critical site, and procurement of High Containment Professional Services to support all aspects of a major programme; and
• Technology related purchases, including service infrastructure such as services for hosting and data centres, connectivity of our networks and telecoms and mobiles, products and services for the digital workplace, managed print, software and security, IT equipment and hardware, business applications, application development and maintenance.

Links to departmental commercial opportunities

Direct opportunities

One of the most important things contracting authorities can do is to provide the market with information about current and future public contract opportunities by publishing a forward-looking procurement pipeline. The Procurement Act 2023 achieves this by requiring the publication of pipeline notices in certain circumstances. This is of particular benefit to SMEs, as it provides them with time to plan for future work, ensuring a competitive and diverse market.

Pipeline notices (UK1) for any intended requirement over £2 million are published on Find a Tender.

Find live opportunities by registering for our e-tendering system.

Read about how to look at the notices, notifications and the use of data.

You can search and apply for contract opportunities.

Joining Frameworks, Dynamic Purchasing System or Dynamic Markets

Joining a commercial agreement, such as a framework, Dynamic Purchasing System (DPS) or Dynamic Market (DM), can put SMEs in front of buyers actively seeking their services.

Framework agreements establish terms for future contracts, providing a pool of pre-selected suppliers from which public sector buyers can call off orders.

DPS/DMs are an ‘always open’ electronic list of pre-qualified suppliers that public sector buyers use to quickly and flexibly purchase goods, services, or works.

For frameworks owned and operated by Defra Group, we often share a forward look of intended purchases with suppliers ahead of time. We also use frameworks owned by other organisations, especially Crown Commercial Services. Search the Crown Commercial Service commercial agreement pipeline for upcoming agreements.

Joining a supply chain

Contracting directly with Defra Group is not the only way to do business with us. There are also opportunities to join our supply chain by working with our direct suppliers. For example, Contracts Finder or Find a Tender Service will display contracts that we have awarded to larger suppliers; you can then look on their website for contract opportunities or approach them with an offer to work with them. Many industry bodies and trade associations also advertise opportunities in supply chains.

We also use an electronic marketplace (eMarketplace) for common goods and services. Defra currently use eMarketplace for all our catalogues which cover low value high volume spend within the department. As part of our commercial strategy, we engage UNITE, where suppliers can be onboarded directly onto their site and their catalogues appear on our eMarketplace.

This opens the marketplace not only for Defra Group but also to wider government clients. Onboarding to UNITE can be found at Connect - Solutions for B2B-Supplier United.

Read further information on how to do business with our department.

Departmental supplier events

Defra Group have not in the past held regular supplier engagement events, we do routinely hold events for specific upcoming procurements to help us understand how best to interact with the market and assess the market’s capacity and appetite to deliver our requirements. These events are held virtually by default to reduce the travel burden and time requirements for suppliers. Upcoming supplier events will always be advertised on the Find a Tender Service, usually by way of a Preliminary Market Engagement Notice.

We use Crown Commercial Services frameworks where we can. A list of events relating to upcoming framework agreements, and events to help SMEs engage with frameworks, can be found on the CCS website.

Our actions and milestones

Theme 1: Visibility and transparency

Our pipeline of requirements

We seek to continuously improve our pipeline visibility and make it of value to SMEs through publication of future opportunities directly from our eSourcing system as soon as we know they are coming. Suppliers are encouraged to visit the Find a Tender Service (FTS) to check on upcoming opportunities across government. We ensure opportunities are marked ‘SME suitable’.

Data and information

We commit to:

• building on our current recording and reporting of SME spend data which covers both direct and indirect spend data annually
• continuing to work on improving the accuracy of the SME classification with an automated process
• promoting transparency of SME figures across the Defra group Commercial teams
• increase reports available for self-serve and internal reporting
• continuing to capture SME awards at contract award stage

In 2023/24 we also significantly reduced the number of standard terms and conditions across Defra group to enable clearer and more consistent terms of agreement between client and supplier.

Theme 2: Building our expertise

Best practice database

We will develop a best practice database for use within our category teams and contract and supplier management community within Defra group. This will highlight SME and VCSE involvement in commercial activity including signposting to good practice elsewhere across government. We will embed a knowledge sharing approach with stakeholders within Defra and with our supplier base.

Access for SMEs

Defra group Commercial will continue to embed sustainability and social value considerations in our procurement opportunities. For example, “economic growth” themes are social value benefits that are being leveraged to increase supply chain resilience and capacity. They enable sub-contracting, access greater innovation and grow our supply chain diversity to support SMEs.

The minimum social value weighting in all our bid evaluations is 10% in accordance with PPN002 (taking account of social value in the award of government contracts) which we monitor as part of our governance and approvals process for contract awards. We will report on how many contracts awarded have social value benefits embedded. 

We will ensure all Procurement Policy Notes (PPNs) relating to SMEs are fully reflected in our refreshed category strategies, such as specific consideration of applying PPN005: reserving below threshold procurements to deliver improved access for SMEs to our opportunities.

Contract management and prompt payment

We will support SMEs by ensuring our contract obligations are met, including prompt payment within 30 days of invoicing. Where SMEs are sub-contractors we will work with our strategic tier 1 suppliers to ensure the same. We have implemented the PPN ensuring that captured tier 1 suppliers are advertising new sub-contracting opportunities on Contracts Finder.

Defra will continue to improve how it supports payment to SMEs and ensure we support prompt payment initiatives for payments made to tier 1 suppliers and those from tier 1 suppliers to their sub-contractors in line with the Procurement Act 2023.

Category strategies

Our category strategies set out how we encourage SME participation including:

• varying routes to market such as lotting strategies that support SME and VCSE involvement whether as a direct supplier or as part of a tier 1 supplier’s supply chain
• requiring transparent plans from tier 1 suppliers for their supply chain including how they will engage with SMEs
• use of Crown Commercial Services (CCS) Frameworks (with committed 35% SME coverage) including G Cloud agreements
• where appropriate use PPN005 (reserving below threshold procurements) where it could deliver improved access for SMEs

CCS is the national procurement partner for the UK public sector and provides a route to market for common goods and services. CCS commercial agreements are published as frameworks, catalogues, and dynamic purchasing systems (DPS) where details of these and how to access them as a supplier can be found on crowncommercial.gov.uk. Read guidance on how to become a CCS supplier.

Over the life of the action plan we will:

• develop market specific intelligence on SME presence for a given category, including the extent of these organisations within supply chains of tier 1 suppliers
• engage business owners for Defra group’s major programmes to review opportunities to expand use of SMEs as part of Defra’s wider sustainability agenda
• strengthen use of the Sustainability Risk Management Tool at the outset of procurements to capture issues and opportunities for SME involvement in a procurement - this information will be captured on our eSourcing system to enable accurate reporting

Theme 3: Market engagement

Pre-market engagement

We will seek opportunities to engage with SMEs and their trade organisations to understand market drivers, innovation opportunities, capability and improve visibility of opportunities. We will hold pre-market engagement events (both in person and virtual) to encourage SMEs to work with us, either directly or through our supply chain. We will clearly explain our procurement process.

Simplified procurement processes

Defra will continue to use standard forms of contract, such as the Model Service Contract, Mid-tier Contract and Short Form Terms and Conditions. We have commenced a review of procurement documentation to reduce complexity of tender documentation and will look to ensure consistency with CCS templates as appropriate. The 12 key barriers for SME involvement identified by the Cabinet Office Small Business Advisory Panel continue to be addressed in our Procurement Policy and process guidance materials.

We will review our templates for supplier engagement, including our tender packs, to ensure they are in plain English and encourage simple processes and bid criteria.

Strengthened governance, leadership, advocacy and challenge

We will:

• continue to regularly engage with the Cabinet Office Small Business team
• continue to develop SME reporting and monitoring of annual Indirect SME spend supply including trend analysis
• embed this action plan within the wider Defra group work on sustainability and supplier diversity
• review progress against the action plan twice yearly including reporting progress to Defra Corporate Service Board, Cabinet Office and annually to Defra group Executive Committee
• keep SME engagement and target progress on the agenda of Commercial Business Relationship Management meetings with our ALBs
• review annually and update the actions for the following year which will be signed off by the Defra group Commercial Chief Commercial Officer

Future years’ actions may include establishing a stakeholder forum led by our SME champion involving Category teams, Supplier Relationship Managers and Contract Managers from across Defra and ALBs to oversee delivery on this action plan.

Additional considerations 

Even with the above specific commitments to increase visibility of opportunities and engagement with SMEs, we recognise that there are challenges. For example, we have seen over the past year some SME suppliers to Defra being reclassified as non-SME due to the growth of their businesses, which is very positive and demonstrates success of our work with SMEs to this date. We will work with SMEs and with tier 1 suppliers using SMEs to develop case studies that demonstrate continued growth even where status has changed.

Some of our requirements may not be possible to be delivered by SMEs due to the scale that is required to support critical services. We recognize that therefore opportunities may lie in our indirect spend and we will work with our tier 1 suppliers to ensure the promotion of opportunities within their supply chains.

Our commitment to working with SMEs is clear from this action plan but it should not be taken as a guarantee that either spend with SMEs will increase, or that a specific number of contracts will be awarded to SMEs. There can be no commitment or representation on the part of Defra (or any other person) that any contractual arrangement will be entered into, or that we will proceed with any specific procurement.

Improvement action	Benefit to SMEs	Progress to date
Review our current contracts and procurement needs to understand which opportunities are available for SMEs and make these clear on our published pipeline, published direct from our eSourcing system.	Visibility & Transparency	Reviewed monthly with Commercial leadership, ongoing
Improve efficiency of procurement systems by simplifying eSourcing system sign-up and removing supplier duplication on Purchase to Pay system, speeding up processes and payments.	Visibility & Transparency	The new Find a Tender Service Central Digital Platform has been implemented; Purchase to Pay currently under review
Reduce the number of standard terms and conditions available across Defra group to facilitate streamlined supplier sign-off, particularly for SMEs.	Visibility & Transparency	In 2024/25 we reviewed our low-value terms and conditions, standardising from c.70 different templates to 2. Further improvements ongoing.
Share best practice case studies with Commercial and Contract Management communities across Defra group.	Building Expertise to ensure more opportunities are made available	Ongoing
Ensure all our Procurement Strategies set out how we will engage with potential suppliers to share our requirements and seek to understand market drivers, innovation opportunities and capacity. We will ensure all PPNs relating to SMEs are fully reflected in our refreshed category strategies. This will include market engagement events (both in person and virtual) that target specific sectors where we believe SMEs can help deliver our programme of work. The number, feedback and outcomes of such events will be recorded in Contract Award Reports and disseminated to relevant Defra group Commercial Category teams.	Building Expertise to ensure more opportunities are made available.	Commercial templates have been reviewed in advance of the new Procurement Act to ensure consideration for SMEs is prompted in the template. Support for category strategies ongoing.
Engage with business owners in Defra group to encourage use of MyBuy platform. MyBuy will provide guidance to buyers in selecting fit-for-purpose suppliers and expanding SME access to procurement opportunities.	Engaging effectively with the market to ensure SMEs are included fairly.	MyBuy being reviewed and refreshed in 25/26.
Implement and continuously improve risk management actions on Sustainability and Supplier diversity within the Commercial lifecycle.	Engaging effectively with the market to ensure SMEs are included fairly.	Ongoing.
Conduct an annual Indirect SME spend supply survey to identify 3rd Party SME spend. Align with Voice of the Supplier survey to critical suppliers targeting SME supply chain activities. Provide twice yearly updates on action plan progress to Defra Corporate Service Board and annually to Defra group Executive Committee. Provide quarterly progress reviews with Cabinet Office as part of regular engagement meetings. Refresh this action plan on a yearly basis.	Engaging effectively with the market to ensure SMEs are included fairly.	Ongoing.

Case studies

Defra group Commercial’s templates and guidance for buyers is designed to prompt us at every stage to consider opportunities to engage SME suppliers and remove barriers to their participation. Some key successes in this area that we are very proud of are outlined below.

• The Asset Operational Maintenance and Response framework was awarded in March 2024. It has 3 lots and a total estimated value of 600 million over 4 years. A key goal was to enable SMEs to have a strong chance of gaining a place on a high-profile national Framework. It ensured through supplier selection that bidding was not too onerous for small organisations and the strategic approach to the lot structure removed barriers to entry by developing a regional structure; allowing suppliers a place on the framework in a single area, rather than requiring national coverage. It increased the threshold for direct awards to reduce administrative costs for appointed suppliers and to enable better focus on providing value for money. This approach led to 68% SME response at Supplier selection. Following shortlist and award, 51% of the 27 suppliers are SMEs.
• The Environmental Science Research, Development & Evidence framework was let in 2025 to provide a simpler route for both buyers and suppliers to source environmental and social research from a complex marketplace, expanding on the success of the previous RDE framework let in 2021. The framework re-procurement placed emphasis on ensuring access for SMEs and VCSEs, including multiple pre-market engagement activities specifically focussed on SMEs. 30% of bidders to the framework were SMEs, and 31% of suppliers appointed a place on the framework as a result are SMEs. Based on feedback from suppliers on the previous framework, the lotting structure was re-done for the ESRDE framework, creating smaller and more specific sub-lots to allow specialist SMEs better opportunities to shine.

Our spend with SMEs

This table includes Defra Group’s previously published spend figures and percentages. However, in 24/25 we conducted a review of our data to better align with the Cabinet Office classifications of suppliers and cleansed incorrectly classified data. The decrease in spend in 24/25 is due to this exercise, as a number of our suppliers had been incorrectly labelled as SMEs, falsely inflating previous years’ figures. Future targets are therefore based on the corrected data.

Financial year	Direct spend with SMEs % Target	Total procurement spend (£)	Direct spend with SMEs (£)	Direct spend with SMEs %
2020/21	No target	£1,724,331,910	£329,956,045	19.14%
2021/22	No target	£1,739,604,821	£336,174,805	19.32%
2022/23	No target	£2,061,723,347	£363,828,435	17.65%
2023/24	No target	£2,188,229,603	£382,970,447	17.50%
2024/25	No target	£2,056,903,350	£329,529,366	16.02%
2025/26	17.3%	To be confirmed	To be confirmed	To be confirmed
2026/27	18.7%	To be confirmed	To be confirmed	To be confirmed
2027/28	20.0%	To be confirmed	To be confirmed	To be confirmed

Figures correct on gov.uk as of 20 January 2026.

Spend by Executive Agencies and Non Departmental Public Bodies (NDPBs) has been included in the above table.

Indirect Spend (where applicable)

Data from 22/23 and 23/24 has not yet been published centrally on gov.uk.

Financial year	Total procurement spend (£)	Indirect spend with SMEs (£)	Indirect spend with SMEs %
2019/20	£1.265bn	£103m	8.10%
2020/21	£1.714bn	£108m	6.30%
2021/22	£1,705bn	£44m	2.60%
2022/23	£2,061bn	To be confirmed	To be confirmed
2023/24	£2,188bn	To be confirmed	To be confirmed
2024/25	£2,056bn	To be confirmed	To be confirmed
2025/26	To be confirmed	To be confirmed	To be confirmed
2026/27	To be confirmed	To be confirmed	To be confirmed
2027/28	To be confirmed	To be confirmed	To be confirmed

You can also view past central government spend with SMEs.

Our payment performance

Government is leading by example and paying our suppliers promptly. Late payment is an issue for businesses, especially smaller businesses, as it can adversely affect their cash flow and jeopardise their ability to trade. The government recognises that the public sector should set a strong example by paying promptly. The public sector is required to pay their suppliers in 30 days and report on their performance on an annual basis. 30-day terms also apply in public sector supply chains. Our department’s latest payment performance is set out below.

Latest report covering 2024/25 Q1-3, covering core Defra only

• 96% of invoices were paid within 5 days
• 98% of invoices were paid within 30 days

You can:

• view our payment statistics, including Arm’s Length Bodies
• view further information on government’s payment policy and legislation

SME Hub

The small and medium business hub is a dedicated space for SMEs looking to work with the government. Here you will find links to other departmental action plans and centralised guidance on bidding for government work.

Contact us

Share your SME feedback. Whether you are a current supplier or interested in working with us, your input is valuable.

You can contact us via email: procurement@defra.gov.uk.

You can find out about our department.