Small businesses across the UK are set to receive more than £7.4 billion annually in government spending by 2028, following the introduction of new departmental targets.
For the first time, individual government departments have been assigned specific goals for how much they will spend directly with small and medium-sized enterprises (SMEs). These measures aim to stimulate economic growth and deliver on commitments outlined in the government’s Plan for Small Business.
Under the new system, departments will be required to publish annual progress reports to ensure transparency and accountability. Those that fall short of their targets will need to outline clear plans for improvement.
In addition to this £7.4 billion commitment, the Ministry of Defence will increase spending with small businesses by a further £2.5 billion, reaching £7.5 billion by May 2028.
While these targets focus on direct spending, the total financial benefit to SMEs is expected to be even greater, as billions more will flow through supply chains connected to government contracts.
The initiative reflects the government’s broader strategy to empower businesses as drivers of growth and prosperity. By strengthening the private sector, the aim is to create more job opportunities and boost local economies across the country.
This builds on last year’s launch of the Small Business Plan, which included major reforms to tackle late payments and a £4 billion funding boost designed to improve access to finance for smaller firms.
The funding will support businesses across a range of sectors, including cyber, manufacturing, finance, and science. Previous SME beneficiaries of government contracts include UMi in Durham, which leads the Business Support Service, and Logan Construction in the South East, which has secured several public sector construction projects.
Overall, the new targets are intended to shift more government spending away from large multinational corporations and towards smaller, local businesses – helping to strengthen communities and create jobs throughout the UK.
Departmental targets include 40% from DSIT, 33% from DCMS, and 30% from the Cabinet Office. Nearly half of all departments have set targets above 20%, meaning that for many areas of government, at least one in every five pounds spent will go directly to small businesses.