Government Sets £7.4bn SME Spending Targets to Transform Public Procurement Access by 2028

The UK government has unveiled a significant shift in public procurement strategy, setting new departmental targets designed to channel billions of pounds directly into small and medium-sized enterprises (SMEs). The move signals a more structured and accountable approach to SME engagement, with ministers aiming to embed smaller businesses more deeply into the public sector supply chain.

At the core of the policy is a commitment to deliver more than £7.4 billion in annual government spending to SMEs by 2028. This funding is intended to stimulate economic growth, create jobs, and strengthen local communities by ensuring a greater share of public contracts is awarded to smaller firms rather than concentrated among large suppliers.

What distinguishes this latest reform from previous initiatives is the introduction of individual spending targets for each government department. For the first time, departments will be required to define how much procurement spend will go directly to SMEs and report on their progress annually. Those that fail to meet their targets will be expected to outline corrective action plans, introducing a new level of accountability into the procurement system.

Small Business Minister, Blair McDougall said:

“These new targets will ensure thousands of smaller businesses have greater opportunity to win lucrative government contracts and grow their businesses.”

The policy forms part of a broader strategic effort to reduce barriers that have historically limited SME participation in public contracts. While SMEs already benefit indirectly through supply chains, the government is now prioritising direct engagement, which typically delivers greater commercial value and growth potential for smaller businesses.

Sector-wide impact is expected, with funding spanning industries such as manufacturing, cyber, finance, and science. This cross-sector approach reflects the government’s intention to use procurement as a lever not just for economic stimulus, but for innovation and regional development.

The new targets also align with wider policy commitments under the government’s Small Business Plan, which includes measures to address late payments and improve access to finance. Together, these initiatives aim to create a more supportive operating environment for SMEs, particularly those seeking to scale through public sector opportunities.

For SME leaders, the implications are substantial. Increased transparency around departmental spending priorities provides clearer visibility into where opportunities will emerge, enabling more targeted bidding strategies. At the same time, the emphasis on accountability suggests a more competitive and performance-driven procurement landscape, where demonstrating value, reliability, and social impact will be critical.

However, while the headline figures are significant, the effectiveness of the policy will depend on execution. SMEs have long cited complexity, administrative burden, and slow procurement cycles as barriers to entry. The success of the new targets will therefore hinge on whether departments can translate spending commitments into genuinely accessible opportunities.

As the policy takes effect, it represents a decisive step toward rebalancing public procurement in favour of smaller businesses. The ambition is clear: to ensure that SMEs are not just participants in the UK economy, but central drivers of its future growth.