Small British defence companies are set to gain easier access to Ministry of Defence contracts after the government launched a dedicated unit to simplify procurement and boost spending with smaller suppliers.
The Ministry of Defence has unveiled the Defence Office for Small Business Growth, a new service designed to cut through what ministers describe as labyrinthine procurement processes that have historically shut small and medium-sized enterprises (SMEs) out of the defence market.
Announcing the initiative, Luke Pollard, minister for defence readiness and industry, said the government wanted to redirect more defence spending towards British firms and trusted allies.
“In more difficult times, being able to bring more of our supply chain to Britain, or to friendly NATO partners, is absolutely vital to building our war-fighting readiness and deterrence,” Pollard said. “Any military is only as strong as the industry behind it.”
From February, thousands of small defence businesses will be able to access tailored guidance from commercial experts through the new office, alongside a “confidential channel” allowing firms to raise concerns about their treatment by government buyers or large prime contractors.
Pollard said previous procurement practices had too often favoured large overseas suppliers, with insufficient UK content. “There is more opportunity for small businesses to be part of that strength by selling more of their product in, and by making it easier for them to do so,” he said.
The initiative forms part of a wider push to reverse a long-term decline in SME participation in defence procurement. The MoD currently spends around £5 billion a year with roughly 12,000 SMEs operating in the UK defence sector. Ministers now want to increase that figure by 50 per cent, equivalent to an additional £2.5 billion a year, by May 2028.
According to MoD estimates, direct and indirect spending with British SMEs has fallen from 25 per cent to 20 per cent of the £29 billion the department spent with UK companies in 2024. By comparison, the United States Department of Defense spends more than 40 per cent of its budget with SMEs, under mandated targets.
Pollard acknowledged that procurement culture within the MoD would need to change if the new targets were to be met. He said the department aimed to dramatically shorten contract timelines, with deals that currently take an average of five years to agree reduced to two years, two-year processes cut to one, and one-year negotiations shortened to a matter of months.
The announcement comes amid scrutiny of the MoD’s growing use of non-competitive procurement. The department said that 49 per cent of the value of new contracts awarded in the year to April 2025 were issued without competitive tender, the highest level since 2016. Major suppliers such as BAE Systems have been significant beneficiaries of this approach.
Ministers argue that increasing SME participation will strengthen supply-chain resilience and innovation, particularly as defence spending rises. The government has committed to increasing defence expenditure to 2.6 per cent of GDP by 2027, creating what Pollard described as an opportunity to “rebalance” who benefits from that investment.
The MoD said the Defence Office for Small Business Growth would play a central role in ensuring that future increases in defence spending translate into more opportunities for smaller British firms, rather than being captured primarily by large multinational contractors.
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Small defence firms to get easier access to MoD contracts under new growth unit