The UK government has announced new measures to support small and medium enterprises (SMEs) in the defence sector, ensuring they benefit from the historic increase in defence spending and play a key role in strengthening the nation’s security and economy.
As part of the Defence Industrial Strategy, the government will establish a new SME support hub to help small businesses access the defence supply chain and set new spending targets to increase direct SME investment. These measures will drive job creation, economic growth, and technological innovation in local communities across the UK.
Backing small businesses in Defence
Prime Minister Keir Starmer and Defence Secretary John Healey announced the initiative while meeting business leaders, apprentices, and students at a Defence Careers Fair. The measures aim to:
Increase SME participation in defence contracts, ensuring more small, family-run, and high-tech businesses benefit from the UK’s growing defence budget. Boost local economies by directing more defence investment into small towns and suburbs across all UK regions. Fast-track innovation by unlocking the potential of SMEs in cutting-edge defence technology, making procurement faster and more accessible. Support workforce development by helping small firms train and upskill workers, creating high-quality, well-paid jobs.
New spending targets and SME Support Hub
The new SME support hub, set to launch later this year, will provide:
Clear guidance for SMEs on securing defence contracts. Access to finance and investment opportunities for small businesses looking to scale up. Connections with larger defence firms to help SMEs integrate into major supply chains. Support for innovation and exports, helping UK firms remain competitive on the global stage.
The government has also committed to setting direct SME spending targets for the Ministry of Defence by June 2025, ensuring more contracts go to smaller businesses.
Investing in National Security & Economic Growth
This initiative follows the Government’s commitment to increase defence spending to 2.5% of GDP by April 2027, with a long-term target of 3% in the next Parliament. The increased investment will not only strengthen UK national security but also unlock prosperity through new jobs and business growth.
70% of MOD spending already benefits businesses outside London and the South East. Defence spending supported over 430,000 UK jobs in 2023-24, including in high-tech industries. SME participation is set to grow, with increased opportunities in cyber, AI, autonomous systems, and aerospace technologies.
Industry & Government Leaders Welcome the Move
Prime Minister Keir Starmer stated: “The UK’s defence industry is a source of national pride, supporting hundreds of thousands of good jobs across the country. By increasing our investment and helping small businesses access these opportunities, we’re boosting national security while putting more money into working people’s pockets.”
Defence Secretary John Healey MP added: “For too long, small businesses have struggled to break into defence. That’s changing. Our historic increase in defence spending will not only strengthen the UK’s security but also create new opportunities for SMEs to thrive.”
A New Era for UK Defence Industry
With the upcoming Defence Industrial Strategy, these measures will modernise the UK’s defence supply chain, ensuring that British SMEs drive innovation, create jobs, and strengthen national security.
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