Following the government’s announcement to increase the defence budget to 2.5% of GDP, a package of measures has also been revealed to ensure SMEs benefit from the increased government spending.
The government has announced plans to launch a new hub to provide small and medium enterprises (SMEs) with better access to the defence supply chain and committed to set direct SME spending targets for the Ministry of Defence by June this year. Plans aim to ensure the uplift in defence spending delivers new jobs, economic growth and innovation across the UK, and hopes to give more confidence to the 12,000 SMEs across the country to raise finance and invest in workers.
The new Hub will work with suppliers across the nations and regions of the UK to ensure that it fully meets their needs. This will strengthen defence procurement through increased choice and faster access to innovation.
Currently, 70% of defence spending goes to businesses outside London and the South East; however, just 4% of spending went to SMEs in 2023-24. During that year, the Ministry of Defence spent a total of £28.8 billion with UK industry, with the total spend in the North West region increasing 18% on the previous year.
Prime Minister Keir Starmer said:
“The UK’s defence industry is a source of national pride. It supports hundreds of thousands of good jobs up and down the country and represents British manufacturing at its best.
“Increasing our investment in defence is not only bolstering our national security, it is an opportunity to put more money into working people’s pockets and boost economic growth.
“By helping smaller businesses to access this money, we’re making communities across the UK better off and opening up more opportunities to train for good, skilled, productive jobs.“
Defence Secretary John Healey MP said:
“This Government’s historic increase in defence spending to 2.5% of GDP by April 2027 will boost national security and make defence an engine for economic growth throughout the UK.
“For too long small businesses felt locked out of defence, but we’ve listened and we’re acting. Today’s announcement will ensure that smaller firms benefit from increased defence spending, attracting new suppliers and fast-tracking the technologies of the future into the hands of our Armed Forces.
“This a new era for defence and we will ensure it plays the fullest part in our national economic growth“
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