MoD Publishes SME Action Plan with Ambition to Increase SME Spend by £2.5 Billion by 2028

Homeland July 23, 2026

Prime Minister Rishi Sunak has announced that the UK will increase defence spending to 2.5% by 2030.

The Ministry of Defence has set out its most comprehensive commitment to small and medium-sized enterprise growth in a generation, with a 50% increase in SME spend targeted by summer 2028 and a new Office for Small Business Growth leading delivery.

The Ministry of Defence has published its SME Action Plan, committing to increase direct and indirect spend with small and medium-sized enterprises by £2.5 billion on top of its existing £5 billion annual baseline – a 50% uplift targeted by summer 2028. The plan, introduced by Minister for Defence Readiness and Industry Luke Pollard and underpinned by the newly established Defence Office for Small Business Growth, represents the most structured and publicly accountable commitment the MoD has made to opening defence procurement to smaller businesses.

The ambition is explicitly tied to the Defence Industrial Strategy and Defence Investment Plan, with ministers making clear that delivery on both documents depends in large part on how effectively the MoD can bring SMEs into its supply chain. The plan acknowledges directly that previous commitments have not delivered the change required, and frames this action plan as a reset rather than a continuation of existing approaches.

Concrete spending targets have been set for the first time at departmental level. For 2026/27, the MoD is targeting £1.48 billion in direct SME spend and £4.5 billion indirectly through the supply chain, rising to £2 billion direct and £5.5 billion indirect in 2027/28. These targets will be monitored through improved reporting tools and held to account at senior leadership level across all portfolios.

To reduce the friction that has historically made defence procurement difficult to navigate for smaller businesses, the plan sets out a series of time-bound actions. These include mapping and simplifying MoD entry points and portals, reducing unnecessary paperwork in the bidding process, reviewing approaches to social value and consortium bids, and expanding the SME Champions network across strategic partners and prime contractors. A dedicated contact centre, anonymous helpline and website are already live through the Office for Small Business Growth, alongside a publicly available SME Commercial Pathway.

The plan also addresses the financial ecosystem around defence SMEs, committing to work with venture capital, angel investors and high street banks to improve access to finance and clarify that ESG regulations do not present a barrier to backing defence businesses. This sits alongside the wider £4 billion government finance package designed to support SME growth across the economy.

Several delivery programmes are already operational and referenced within the plan, including the Commercial X transformation programme, which is delivering contracts up to £50 million at pace through mechanisms including the Neutral Vendor Framework for Innovation and the Defence Unicorn Fund. UK Defence Innovation continues to support start-ups and non-traditional suppliers, while Defence Growth Deals – a £250 million programme – are being used to build regional industrial capacity and workforce capability across the four nations.

For the UK defence supply chain

For SMEs already working in defence or considering entering the market, the action plan represents a genuine structural shift in how the MoD intends to engage with smaller businesses – with named programmes, published targets and clear accountability. The message from ministers is unambiguous: the MoD recognises it has underperformed on SME access and is committed to changing that, with the spending targets and reform programme to back it up.

Organisations looking to understand how these changes translate into practical opportunity – including how procurement reform is reshaping engagement, where SME-friendly frameworks and entry points are emerging, and how to position within the supply chain of major primes – will find these issues at the centre of the agenda at the DPRTE UK National Defence Procurement and Supply Chain Summit, taking place on 22 October 2026 at the Kimpton Clocktower Hotel, Manchester. Key themes directly relevant to the action plan include:

MoD procurement reform and the SME Commercial Pathway
Direct and indirect supply chain access routes for SMEs
Defence innovation funding, UKDI and Commercial X programmes
Prime contractor and strategic partner SME engagement
Regional defence clusters, Defence Growth Deals and skills programmes
Finance, investment and the defence SME funding landscape

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