Small UK defense contractors are to get easier access to Ministry of Defense contracts after the government set up a dedicated unit to simplify procurement and boost spending from smaller suppliers.
The Ministry of Defense has unveiled the Defense Office for Small Business Growth, a new service designed to break through what ministers described as labyrinthine procurement processes that have historically excluded small and medium-sized enterprises (SMEs) from the defense market.
Announcing the initiative, Defense Readiness and Industry Secretary Luke Pollard said the government wanted to redirect more defense spending towards British businesses and trusted allies.
“In more difficult times, the ability to bring more of our supply chain to the UK or to friendly NATO partners is critical to building our war readiness and deterrence,” Pollard said. “Any military is only as strong as the industry behind it.”
From February, thousands of small defense contractors will be able to access tailored advice from commercial experts through the new office, as well as a “confidential channel” allowing companies to raise concerns about their treatment by government buyers or large prime contractors.
Pollard said previous procurement practices had too often favored large foreign suppliers with insufficient British content. “There are more opportunities for small businesses to be part of that strength by selling more of their products and making it easier for them to do that,” he said.
The initiative is part of a broader effort to reverse the long-term decline in SME participation in defense procurement. The Ministry of Defense currently spends around £5 billion a year on around 12,000 SMEs operating in the UK defense sector. Ministers now want to increase this figure by 50 percent by May 2028, equivalent to an additional £2.5 billion a year.
The Ministry of Defense estimates that direct and indirect spending on UK SMEs has fallen from 25 per cent to 20 per cent of the £29 billion the department spent on UK businesses in 2024. In comparison, the US Department of Defense spends more than 40 percent of its budget on SMEs within specified targets.
Pollard acknowledged that the procurement culture within the Defense Department must change if the new goals are to be achieved. He said the department is seeking to dramatically shorten contract terms by reducing contracts that currently take an average of five years to negotiate to two years, shortening two-year processes to one year and shortening one-year negotiations to a few months.
The announcement comes amid the Defense Department’s review of the increasing use of non-competitive procurement. The department said 49 percent of the value of new contracts awarded in the year to April 2025 were awarded without competitive bidding, the highest since 2016. Major suppliers such as BAE Systems have been key beneficiaries of this approach.
Ministers argue that greater participation by SMEs will strengthen supply chain resilience and innovation, particularly as defense spending increases. The government has committed to increasing defense spending to 2.6 percent of GDP by 2027, creating what Pollard calls an opportunity to “balance” who benefits from that investment.
The Ministry of Defense said the Ministry of Defense for Small Business Growth will play a central role in ensuring that future increases in defense spending lead to more opportunities for smaller UK businesses and are not primarily taken up by large multinational contractors.
