Policy paper

Ministry of Defence’s Small and Medium-sized Enterprise (SME) action plan

Published 21 July 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:

• increasing defence spending and a focus to spend more with British firms and SMEs

• 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 122 of the Procurement Act 2023.

Forewords

In the Defence Industrial Strategy published last autumn, we set out a clear ambition: to reform procurement, innovate at wartime pace, and grow our industrial base. Likewise, in the Defence Investment Plan published earlier this month, we made it clear that we will prioritise investment in the future of our Armed Forces, and deliver deterrence through warfighting readiness.

In many ways, our success will hinge on how we better support small and medium-sized enterprises. We recognise the ingenuity, flexibility, ambition and drive that they bring. SMEs also bring real localised growth to communities across our four nations. We also recognise that we must do better, both in how we behave and in how we open ourselves up to new ideas, innovation and risk. The passion to make a difference must sit at the very heart of how we work, not at the margins.

In an increasingly contested and uncertain world, supporting business is not simply a matter of good economic policy, but one of national resilience.

So, I am pleased to introduce this action plan as our public commitment to address this critical issue head-on. I do not shy away from the fact that defence procurement needs improving. While we rightly celebrate successes such as Taskforce KINDRED in its critical support for Ukraine, the Type 26 deal with Norway, and the Dragonfire programme, we suffer in other areas from avoidable waste, excessive process and unnecessary complexity. That must change, and the Defence Investment Plan is central to this reset.

Led by the Defence Office for Small Business Growth, this action plan will reduce the friction many SMEs face when doing business either directly with us or within the supply chain. We will create better conditions for smaller firms to start, scale and succeed in our market.

This work will make us more resilient, increase productivity, and put the UK on a trajectory towards a safer, more prosperous future. These are bold ambitions, but I firmly believe that if we get this right, we will fundamentally shift how the UK defence sector operates.

In support of this effort, we have set an ambitious target to increase our SME spend by £2.5 billion by summer 2028, in addition to sustaining our current £5 billion baseline. This will require determined action, sustained focus and cultural change. If we are serious about reform, innovation and growth, then we must be serious about the strengths of small business.

Luke Pollard MP, Minister for Defence Readiness and Industry

Thank you for taking the time to engage with this action plan. I want to be clear from the outset: this document is not intended to be shelfware. It is a clear statement of intent, direction and delivery, setting out how Defence will change the way it works with small and medium-sized enterprises and with the wider ecosystem which underpins our national security and prosperity.

I genuinely believe I have one of the most exciting roles in government. This is an opportunity to change outcomes, not just processes.

My role is to take national intent and deliver it locally and practically. That means enabling people with innovative skills, entrepreneurial spirit and real passion to access Defence, often for the first time. It means making Defence an attractive partner to work with, to invest in, and to bring ideas to life, not something that feels inaccessible or reserved for the few.

The task is not easy. The hill is steep. But together, it is achievable.

I am proud to work alongside colleagues from across Defence, many of whom you will encounter as you work through this document. And I am pleased that you are reading it, because it signals that you care about making Defence work better.

You may be engaging with this plan as part of the supply chain, as a direct supplier, or as someone supporting those who deliver for Defence. You may be advising, shaping or challenging us. All of these roles matter immensely.

You may come from venture capital, angel investment or banking. Your contribution is vital if the UK is to grow and scale innovation. You may be a landowner or manufacturer with the ability to expand UK industrial capability. You may represent a large, established supplier, whose role in nurturing and supporting smaller suppliers is essential to a healthy ecosystem.
Or you may be reading this as a start-up, ambitious, motivated, and asking a simple question: how do I get involved?

Our responsibility is to make the answer clear. Some of you may be reading this thinking, “I have heard all this before, and nothing has changed.” You are right. It has not. But I am determined that it will.

This action plan is about laying new foundations, not rebuilding old ones. It is about changing experiences from first engagement to delivery, and acknowledging that this is a long-term transformation, not an overnight fix.

I know some will look at the 2028 milestones and ask how we will get there. The answer is by working together, by moving decisively rather than incrementally. There are constraints I cannot remove. But I can operate within them, stretch them and challenge them. With clear senior sponsorship from ministers, and indeed support from partners outside government, we have the mandate to act.

We will make a difference. We will make change real.

Tim Ketton-Locke, Director of the Office for Small Business Growth

Department Overview

We work for a secure and prosperous United Kingdom with global reach and influence. We will protect our people, territories, values and interests at home and overseas through strong armed forces and in partnership with allies, to ensure our security, support our national interests and safeguard our prosperity.

The MOD is a ministerial department, supported by 24 agencies and public bodies.

For more information about what we do, see Ministry of Defence - GOV.UK

Why SMEs should work with us

We work with around 12,000 SMEs through our supply chain already, and we want to ensure that those SMEs, and any others wishing to join the sector, are able to work and operate effectively and with ease. Underpinning our action plan are four key strategic objectives:

1. Champion policies and behaviours which simplify processes, from concept to contract;
2. Increase our total spend with SMEs by 50% by summer 2028;
3. Improve the diversity and resilience of the UK defence supply chain by requiring better practices from Defence and its major suppliers;
4. Deliver on this national intent through local networks such as the regional defence and security clusters, partner organisations, academia, and local government.

Links to departmental commercial opportunities

Direct Opportunities, Frameworks, and Joining the Supply Chain

Information on how to do business with Defence can be found on the dedicated Procurement at MOD web page. This includes information on frameworks, portals, government grants and funding. This page also covers how to register your interest in working with our strategic suppliers. Working with these organisations is an excellent way to get involved in defence procurement, from research and development funds to sub-contracting opportunities.      

For further resources, please refer to the Office for Small Business Growth website here Defence Office Home Page.

Departmental supplier events

We hold a wide range of supplier engagement events throughout the year. You can keep up to date on these events by following our LinkedIn ‘National Armaments Partnering’, and by registering on the Defence Sourcing Portal.

Major events include:

• Defence Procurement and Supply Chain Summits (DPRTE)
• The Defence and Security Equipment International Exhibition (DSEI)
• The Navy Leaders Combined Naval Event (CNE)
• RUSI Land Warfare Conference
• Farnborough International Airshow

We also hold and attend smaller-scale events such as defence roundtables, regional conferences, and webinars throughout the year.

Our actions and milestones

Policies & entry points

In line with Defence Industrial Strategy commitments, the Office for Small Business Growth was stood up in January 2026. Our contact centre, anonymous helpline and website are all now live. We will continue to improve the Office based on direct feedback from SMEs, from industry events and from workshops, to test, trial and adjust our services and policies.

The SME Commercial Pathway is also now public. The Pathway captures the full range of commercial levers already available internally which can benefit SMEs.

Going forward, we will:

• Ongoing. Advise, shape and grow our SME base by providing them with a simple and more effective means of contacting us to resolve issues, by offering tailored support, by signposting export markets and investment opportunities, and by sharing resources.

• Ongoing. Champion local support and interventions available from our partners in trade associations, regional defence and security clusters, academic institutions and other delivery organisations, as well as colleagues across national and local government, as a networked approach to service delivery.

• Ongoing. Promote a ‘Think-SME’ culture throughout the organisation by using governance forums to hold seniors to account, by tackling bias or risk aversion towards SMEs, by providing constructive feedback for failed SME bids, and by addressing poorly written requirements.

• Starting Q1. Reduce unnecessary paperwork where possible for SMEs when bidding on defence work, such as repeating inputs across different platforms and portals, or disproportionate terms and conditions in contracts.

• Starting Q2. Map our entry points, portals and marketplaces with a simple, publicly available guide. We will consider consolidation or cross-platform sign-on. We will also help SMEs to save time, money and effort by increasing the visibility of upcoming opportunities.

• Starting Q3. Review our approach towards issues such as social value, offsets, consortia bids and open frameworks, ensuring that SME views and needs are heard.

• By Q4. Provide a series of digital tools through our website to facilitate self-help or out-of-hours assistance, alongside routinely updated written guidance relating to procurement processes and policies.

Spend & Investment

Defence is committed to increase spending with British defence industry, including with SMEs. This investment will deliver the stability that underpins long-term economic growth by stimulating productivity and market competition. To deliver this, we will:

• Ongoing. Represent the voice of SMEs in the new Defence Reform model ways of working, including early market engagement programmes and requirement setting. We will ensure close alignment with the needs of our Armed Forces and, where appropriate, we will bolster the supplier relationships already in place.

• Starting Q1. Set internal spending targets across all portfolios, baselined on existing spend with SMEs and paired with a stretch target based on the perceived potential for growth within the market. We will assist internal teams to reach these targets and hold poor performance at senior leadership levels to account.

• Starting Q2. Improve reporting tools for tracking sector growth and SME spend, allowing us to better direct policy interventions and future targets.

• Covering Q1–4. In support of the upcoming Defence Finance and Investment Strategy, we will grow our relationships with key sector stakeholders, from venture capital to high street banks. We will identify ways to make it easier for the financial sector to back defence SMEs, with additional clarity that ESG regulations do not hinder defence finance or investment.

Direct suppliers

Defence works closely with a range of direct suppliers, from the manufacture of submarines to the delivery of IT services. In turn, these suppliers are supported by the supply chain, which nearly always contains SMEs. The supply chain is therefore critical to delivering on our commitment to spend more with SMEs and to support them in meaningful ways. With our direct suppliers, we will:

• Starting Q2. Establish a Strategic Partners and Suppliers pledge to, where possible, align relevant action plans, spend projections, and SME support to work collaboratively for the ecosystem rather than in silos. We will use current SME spend as a baseline, and work together on how to increase that spend going forward.

• Starting Q2. Encourage and promote SME-focused initiatives which benefit both the SME and the needs of the partner or supplier, such as joint R&D projects, skills and apprenticeship programmes, or dedicated resources.

• Starting Q3. Re-invigorate and expand the SME Champions network with our strategic partners to embed positive behaviours in their respective organisations, to drive their own programmes to remove barriers for SMEs, and to create a shared advocacy network across the sector.

• Through Q3–4. Work with and support Strategic Partners through their account reviews and target monitoring sessions to ensure the right data is captured and acted upon, the right interventions are prioritised, and the right culture is in place to achieve our shared goals.

The SME ecosystem

The Defence Office for Small Business Growth will work closely with the following delivery partners to embed a ‘Think SME’ culture across the department.

International Exports

The Defence Exports Unit helps UK defence and dual-use companies of all sizes to export products, technology and services. This includes an SME engagement team which coordinates business support for UK SMEs producing defence or dual-use capabilities through the Export Faculty, a free government resource that provides targeted export support, strategic insights and direct access to global buyers. We will work with International Exports to build exportability in from the start of product development.

Accelerating Commercial Pathways

The Accelerating Commercial Pathways (ACP) programme has been launched to drive substantial changes to our commercial ways of working and culture, in collaboration with our industry partners. These pathways are improving MOD’s ability to exploit the full range of commercial approaches, including harnessing the flexibilities and opportunities presented by the Procurement Act, to drive pace and innovation into procurements. This includes an SME-specific commercial pathway, which is publicly available.

Commercial X

Commercial X is a transformation programme which seeks to overhaul and simplify our procurement processes to get groundbreaking innovation into our hands, faster. They are a team of commercial officers, experienced with innovation and digital solutions, delivering contracts up to £50m and under 2 years, at pace. Commercial X delivers the Neutral Vendor Framework for Innovation, the Dynamic Marketplace, and the Defence Unicorn Fund.  

UK Defence Innovation (UKDI)

UKDI supports SMEs, start-ups, and non-traditional defence and security suppliers to develop and deliver pioneering capabilities. UKDI holds a significant budget to invest in companies with real potential. UKDI also administers the Regional Defence and Security Clusters across the UK to support businesses to access advice and opportunities and runs the Defence Innovation Ideas Marketplace.

Defence Science and Technology Laboratory

Dstl, through its Co-Creation Portal and its sister organisation, Ploughshare, works with SMEs to creatively solve issues facing Defence. Dstl works closely with investors, academia, and partner organisations to take a new idea into a fully-fledged and commercially viable capability.

Defence Growth Deals, Skills, and Apprenticeships

Defence Growth Deals are a £250m programme of specific interventions that not only harness a region’s defence and dual-use strengths but also ensures they are well-placed to support the sector, such as sufficient provision of a skilled workforce. Through initiatives in the £182m Defence Industrial Strategy skills package, and continued commitment to graduate programmes and apprenticeships, we will be supporting the entire defence supply chain to upskill, grow and thrive.

Defence Industrial Joint Council (DIJC)

The DIJC ensures that the SME voice is heard at all levels, from the collaborative working groups where SMEs help shape defence policy, to our Communications Forum where SMEs have the chance to hear from, and reply to, senior leadership on our upcoming requirements, to SMEs and Trade Associations holding seats on the ministerial Top Council.

Case studies

Below are a number of case studies and testimonies where Defence and partners in the sector are already adopting a positive ‘Think SME’ culture.

ASGARD - Digital Decision Accelerators for Defence (DDaD)

ASGARD adopted a deliberately pro‑SME culture by redesigning its procurement to reduce barriers and bid burden. An Open Framework widened access and allowed new SME entrants over time. Virtual market engagement, short bids and presentations reduced cost and risk for suppliers, while proportionate financial assessments avoided excluding innovative SMEs simply for being new or pre‑profit.

Becrypt Ltd

Becrypt Ltd worked with the RAF to deliver digital services and hardware to support the GCAP International Government Organisation (GIGO), the new inter-governmental body for the Global Combat Air Programme. GIGO enabled the rapid delivery of critical digital services that included network, laptops and HR, Finance tools etc, supporting the stand-up of a new inter-government organisation.

Given the urgency of the GIGO requirement, both MOD and our team demonstrated exceptional agility, progressing from requirement to contract in just three and a half weeks. The clear and consistent communication made it easy for us to engage and deliver at pace.

Stephen Simm - Client Director

High Value Manufacturing Catapult

Our three-month pilot accelerator, delivered jointly by the High Value Manufacturing (HVM) Catapult and Make UK Defence in partnership with the Defence Office for Small Business Growth, is supporting 20 SMEs from across the UK as they strengthen or pivot their capabilities into the defence sector.

Early engagement has already demonstrated strong value for participating companies. Chimera Energy, for example, used the programme to refine the commercial positioning of ARCTICVOLT, its portable energy storage system designed for extreme cold environments, helping accelerate engagement with defence and research stakeholders across the UK, Europe and NATO aligned partners. For Hutchinson Engineering, support focused on improving workforce governance and establishing a reliable system for tracking staff skills, training and certifications, key steps in strengthening defence sector readiness and demonstrating capability to customers.

Each company receives an organisational health diagnostic covering strategy, market position, value proposition, design, engineering and manufacturing transformation, leading to a tailored intervention plan to enhance performance. The programme is designed to build an enduring sponsored model for SME growth and long term supply chain resilience.

James Neeley, Strategic Partnerships Director (Defence and Space) | National Composite Centre

NquiringMinds

NquiringMinds is working with its higher-tier sponsor, BAE Systems, to develop advanced analytics for BAE Systems’ combat system in the marine domain to augment the human decision process when there is a large amount of incoming information to process. This information comes from multiple sources, or agents, including humans, computing devices and servers. The sources of the information include radar, satellite data and the Automatic Identification System (AIS) - the coastal tracking system used on ships.

Making optimal decisions, when facts change and trust relationships are in constant flux, is incredibly difficult. But this complexity is what NquiringMinds platform has been designed to solve. We look forward to the opportunity to demonstrate this capability in these mission critical scenarios.

Dr Nicholas Allott, CEO of NquiringMinds

Electromagnetic Activities Accelerator (EMAA)

Dstl designed the EMAA route to market to reduce burden and normalise SME participation. Barriers were lowered through streamlined onboarding, short proposal formats and fast award timescales. Evaluation criteria valued collaboration, allowing SMEs to lead work. Proportionate assurance and faster acceptance of deliverables supported prompt payment, reinforcing a pro‑SME culture and sustained SME involvement.

Filtronic Broadband

Filtronic Broadband is collaborating with a major aerospace company to manufacture and test plastic encapsulated Transmit Receive Modules (TRMs) for electronically scanned radar systems.

This opportunity not only demonstrates our technological expertise but also strengthens our commitment to supporting the UK’s defence industry, its sovereign supply chain and future radar programmes. We are excited to be part of this programme.

Tudor Williams, director of technology at Filtronic.*

The Vanguard programme

The Vanguard programme is an ongoing initiative between Make UK Defence and Amazon Web Services to bring digital transformation to the defence supply chain and specifically the SME community.

As the world’s leading provider of cloud computing, AWS have incredible technology and expertise to assist defence SMEs in scaling up their operations to meet the rising needs of the sector. Phase 1 of Vanguard programme offers 5 businesses a collective budget of more than £750,000 to invest in technology and technical expertise, mentorship and cloud credits to help digitise their operations.  The Defence Office for Small Business Growth was a key partner in the competition, helping down select the businesses from an incredibly competitive roster of SMEs in the defence supply chain. 

James Watson, UK Membership Growth Director of Make UK Defence

Kognitiv Spark

Kognitiv Spark is deploying a Mixed Reality (MR) platform as a service on a defence network, initially for Equipment Support (ES) and Medical Support (MS) uses. MR is the merging of real-world and computer-generated environments, allowing real-time access to support and training.

As a team, we are acutely aware of the unique demands faced by servicemen and women to give life-saving support to another soldier or bring mission-critical equipment back to full serviceability. Our software has had a profound impact on them, as it creates a knowledge and support advantage at the Defence Edge.

Duncan McSporran, a British veteran and co-founder at Kognitiv Spark

North Product Design Studio

NPD Studio is a product design and engineering consultancy based in Samlesbury, Lancashire. BAE Systems engaged NPD Studio to deliver a 7” avionics display unit for rig-based concept prototyping for the Typhoon programme, NPD completed the project in 3 months, against a projected internal delivery of 12, demonstrating the pace and commitment that agile SMEs can bring to complex defence programmes. Working closely with BAE’s engineering team at Warton, NPD took the project from initial requirements through to a fully functional, integrated device, delivered on time and to specification. The project has since expanded, with further devices in development for Expos and further support and assessment capabilities.

What made this work was trust on both sides. BAE Systems gave us the room to move quickly, and we gave them everything we had. The result was a 3-month delivery on a programme that would have missed internal milestones.

Nathan Partington, Founder & CEO, NPD Studio

Our spend with SMEs

Defence spends circa £5bn with SMEs each year, 25% of which is through direct contract award, and the remaining 75% is through the supply chain. In the Defence Industrial Strategy in September 2025, and in the subsequent Defence Investment Plan, we reaffirmed our commitment to supporting our industrial base, to growing a more resilient supply chain, and to act as an engine for growth across the UK. We also committed to spend an additional £2.5bn with SMEs by summer 2028, a significant and ambitious increase of 50% in spend.

Financial year	Total procurement spend (£bn)	Direct spend with SMEs (£bn)	Indirect spend with SMEs (£bn)
2024/25	£31.6bn	£1.24bn	(to be confirmed)
2025/26	(to be confirmed)	(to be confirmed)	(to be confirmed)
2026/27	(to be confirmed)	£1.48bn target	£4.5bn target
2027/28	(to be confirmed)	£2bn target	£5.5bn target

Our payment performance

View historical central government spend with SMEs

View our payment statistics

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

Find out more about the Ministry of Defence

Visit our website for the Defence Office for Small Business Growth

Keep up to date with our activities by following us on LinkedIn ‘National Armaments Partnering’, and by registering on the Defence Sourcing Portal (Procurement at MOD)