Policy paper

Department for Science, Innovation and Technology's small and medium-sized enterprise (SME) action plan: 2025 to 2028

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, 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 out 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. DSIT’s 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.

Purpose

DSIT is committed to increasing opportunities for SMEs across our procurement and grants portfolio and driving innovation across government. DSIT will produce and publish a full action plan in Autumn 2026, following the integration of UK Space Agency and Building Digital UK. This plan sets out the actions we will take to ensure our commercial opportunities are proportionate so that SMEs can compete successfully.

Background

DSIT play a leading role in driving pan government commercial initiatives shaping collaborative programmes to accelerate innovation and improve procurement outcomes for SMEs through initiatives such as the Commercial Innovation Hub and Digital Commercial Centre of Excellence.

Targets

DSIT group (including ALBs) have committed to the following targets:

Measure	Current	Target	Timescales
Spend with SMEs	No current baseline[footnote 1]	40% of procurement spend	2025 to 2028
Prompt payment	90% - 10 days	95% - 10 days	2027
Publication of pipeline	Quarterly - 18 months	Quarterly – 3 years	July 2026 to 2029
Monitoring of Grant Funding SME Awards	No current baseline	Baseline set	April 2027

Programmes excluded from the target

DSITs procurement pipeline has some large programmes which won’t be suitable for SMEs and are therefore excluded from the target. DSIT will request that prime suppliers consider opportunities for SMEs in their supply chains.

• Building Digital UK (BDUK) Direct Spend – this will be procured through existing supply-chains
• Next National Supercomputing Service
• AI Research Resource (AIRR)+

Why SMEs matter to DSIT

Increasing SME participation supports DSITs focus on improving people’s lives by maximising the potential of science and technology. SMEs:

• Accelerate adoption of emerging technologies in DSIT priority areas (AI and compute, life sciences, quantum, semiconductors, digital security).
• Increase supply chain resilience and competition.
• Drive place-based growth by creating high value jobs across the UK.

When DSIT engages the market, this will be advertised via the central digital platform for public procurement, Find a Tender, as required by public procurement legislation.

DSIT core group measures

1. Reduce procurement complexity: streamline documentation; proportional selection and award criteria; and increase the use of challenge led and demo-based procurements.

2. Expand visibility of opportunities: publish and promote our 3-year spending review pipeline; and require primes to advertise qualifying subcontract opportunities.

3. Improve market engagement and inclusion: ensure pre‑market engagement for major projects actively targets SMEs, and schedule dedicated SME sessions for AI and other emerging tech procurements.

4. Strengthen transparency and tracking for grants: implement a consistent methodology to track SME grant recipients and publish data via GGIS and Find a Grant.

5. Maintain prompt payment timescales: continue to meet or exceed 90% within 10 days and 95% within 30 days with performance data published quarterly.

6. Collaborate with Innovate UK: To create industry specific SME action plans for AI and Life Sciences.

7. Support diversity through initiatives like the Women in Tech Taskforce and require suppliers to advertise subcontracting opportunities to widen reach.

8. Offer Super-compute capacity to eligible SMEs via AIRR access.

9. Launch a new social value policy which promotes diversity in underrepresented supply chains and delivery against DSIT objectives.

X-Whitehall measures

DSIT, via the Commercial Innovation Hub will:

1. Publish the Procurement of Innovation Playbook - outlining how to define challenges, engage markets and chose a commercial approach which will increase supplier diversity in procurement - March 2026.

2. Launch a Toolkit which provides simplified procurement templates removing barriers to procurement for SMEs’ – April 2026.

3. Design and publish the Innovation Marketplace –the Marketplace will bring together public sector demand for innovative solutions and those innovative companies developing them (particularly SMEs and start-ups). We believe there are five key outcomes from the Marketplace:

• addressing barriers in public sector procurement
• connecting demand and supply
• enhancing collaboration and innovation ecosystem
• supporting SMEs and Start-ups
• driving economic growth and global competitiveness
  

4. Host the Public Sector Innovation Alliance: A social network which promotes the sharing of best practice approaches to innovative procurement, including SME participation.

DSIT as part of DCCOE will:

1. Work with Crown Commercial Service (CCS)/Government Commercial Agency (GCA) as they develop and launch new commercial agreements – supporting CCS objectives for greater flexibility, promotion of competition and enabling SME participation (e.g. Technology Services 4, Digital Outcomes and Specialists 7, G‑Cloud 15 and Transport Technology).

Annex: Organisational changes affecting the DSIT SME Action Plan

DSIT is currently going through a major organisational restructure. This means our department is changing shape, and several important bodies are in the process of moving into DSIT. Because of this, it is difficult for us to produce a full and detailed SME Action Plan.

1. Ongoing Machinery of Government changes

Throughout 2026, DSIT is being reshaped through a series of Machinery of Government (MoG) changes^{[footnote 2]}. These changes affect how our commercial, finance and operational teams are set up and how we collect and report data.

2 major organisations were previously outside DSIT but are being brought into the department during 2026:

• Building Digital UK (BDUK)
• UK Space Agency (UKSA)

These bodies have their own existing budgets, contracts, and supplier relationships, including work with SMEs. Until they formally join DSIT and systems are aligned, we cannot accurately calculate a full baseline for our SME spend or grants position across the new, expanded department.

2. Previous departmental changes

This year’s changes follow earlier reforms in 2025, when functions from the Government Digital Service (GDS) and parts of the Cabinet Office and Department for Culture, Media and Sport (DCMS) moved into DSIT. These transitions created additional adjustments across our commercial and reporting processes.

As a result, DSIT’s overall structure is still stabilising. We are working to bring together data, contracts and procurement approaches from several different organisations.

3. Impact on the SME Action Plan

Because DSIT is in the middle of this period of change, the following areas cannot yet be fully finalised:

• a reliable baseline for SME spend across the whole future DSIT Group
• a complete picture of SME involvement in grants programmes
• clear long-term targets that reflect the full, consolidated department

DSIT will publish a full and comprehensive SME Action Plan in Autumn 2026.

1. DSIT is currently undergoing machinery of government changes, consolidating colleagues from other departments and ALBs into a single departmental structure. ↩

2. A Machinery of Government (MoG) change is when the Prime Minister decides that certain functions, people, budgets or bodies should move from one department to another. ↩