MOD Targets £7.5bn Annual SME Spend by May 2028

Homeland May 5, 2026

Armed Forces Minister Luke Pollard MP has confirmed that the Ministry of Defence has set a target to grow its direct and indirect spend with United Kingdom Small and Medium-sized Enterprises by 50 per cent on the FY 23/24 baseline by May 2028 – equivalent to a £2.5 billion increase, taking total annual SME spend to £7.5 billion.

The confirmation came in a written answer published by Hansard on 27 April 2026, in response to a question from Tanmanjeet Singh Dhesi MP, Member of Parliament for Slough.

Pollard said that the Ministry of Defence has set an ambitious target to increase direct and indirect spending by 50 per cent compared to the FY 23/24 baseline. He said this increase in total spend would equate to £2.5 billion total spend increase with Small and Medium-sized Enterprises, taking total spend to £7.5 billion by May 2028. The Minister’s answer puts a clear, parliamentary-record figure on a target that has been signalled across Defence Industrial Strategy materials and ministerial statements over the past year.

The target operates on two channels – direct procurement, where the Ministry of Defence contracts SMEs as suppliers in their own right, and indirect procurement, where SMEs sit in the supply chain of prime contractors and other Tier 1 suppliers. Both channels matter, because the structure of defence procurement means that a substantial share of SME activity is reached through prime contractor flow-down. The 50 per cent uplift therefore implies both increased direct contracting opportunities for SMEs and a more deliberate effort by primes to formalise SME engagement and grow Tier 2 and Tier 3 spend.

The figure aligns closely with practice already visible in the market. Babcock’s 24 April convening of around 30 United Kingdom SMEs at the Defence Battlelab in Dorset, supported by a signed SME Engagement Charter, is exactly the kind of structured prime engagement the £7.5 billion target depends on. Similar Engagement Charters and SME programmes are operating across other prime contractors and major Defence Equipment and Support programmes, and are likely to expand as the target sets a measurable expectation against which delivery can be assessed.

For United Kingdom Small and Medium-sized Enterprises, the parliamentary record now provides a useful planning anchor. SMEs should treat the £7.5 billion figure and the May 2028 horizon as concrete in pre-bid conversations with primes, focusing on demonstrable Tier 2 and Tier 3 capability, on alignment with Defence Industrial Strategy resilience priorities, and on participation in formal prime SME engagement structures. For investors and growth advisers, the same target provides a credible top-line indicator of an expanding addressable market. Stakeholders should monitor Hansard for follow-up answers on direct versus indirect spend reporting and on progress against the FY 23/24 baseline.