Small Business, Big Impact: How New Government Policies Could Reshape the SME Landscape

Small and medium-sized businesses in the UK are staring down a transformational moment. New government strategies — ranging from defence spending to procurement reform and digital investment — could open up major opportunities for SMEs. But success will depend on how well these plans translate into reality.

Defence as a Growth Engine for SMEs

The UK government is explicitly using defence investment to benefit small businesses. A key announcement in March 2025 revealed a new Defence Office for Small Business Growth, set to launch in January 2026.

This hub is designed to simplify access for SMEs into the defence supply chain, helping to cut through bureaucratic hurdles, provide guidance, and match smaller firms with procurement opportunities.

At the same time, fresh SME spending targets have been set within the Ministry of Defence, signalling a long-term commitment to integrate small firms more deeply into its industrial strategy. 
According to a speech at DSEI 2025, the MoD aims to spend £7.5 billion with SMEs by 2028, a 50 percent increase.
Defence policy is no longer just about national security — it’s being used as a lever for economic growth, regional development, and innovation.

A More SME-Friendly Procurement Landscape

Procurement reform is at the heart of the UK’s strategy to empower small businesses. The Crown Commercial Service (CCS) published a new SME Action Plan in October 2025, laying out seven concrete actions to reduce barriers.
Key among these are earlier engagement between buyers and SMEs, better guidance on public-sector contracts, and increased transparency around upcoming procurement opportunities. 
The plan also encourages SMEs to form consortia when bidding — making it easier for smaller firms to compete for larger contracts.
These reforms build on the Procurement Act 2023, which enshrined the idea that public bodies must consider SME participation as part of procurement.
If successful, this could mean more public-sector contracts going to local and smaller firms, boosting regional economies and fostering long-term SME growth.

Digital Transformation Gets a Policy Boost

Complementing the procurement reforms is a major push on digital adoption. The SME Digital Adoption Taskforce has released its final report, outlining a 10-step plan to help firms adopt productivity-enhancing tools like CRM, e-commerce systems, and cloud software.
Some of the Taskforce’s recommendations are bold: appointing a minister specifically accountable for SME digital adoption, launching a scalable “CTO as a service” model, and building a cross-government public-private initiative to drive digital uptake. 
The report argues that many SMEs currently overestimate their readiness for digital transformation and identifies clear barriers, including cost, expertise, and risk.
Politically, it is a strong signal: tech policy is being explicitly tied to small business growth, not just innovation for large firms.

The Bigger Picture: Strategic and Political Implications

These policy moves are interconnected and politically strategic. By weaving together procurement reform, defence investment, and digital growth, the government is presenting a unified approach to SME-led economic renewal.
For policymakers, this offers several advantages:

• Economic growth: Supporting SMEs can drive local job creation, innovation, and resilience.

• Industrial strategy: Defence spending becomes not just a cost, but a tool to build a stronger, home-grown industrial base.

• Levelling up: Many SMEs outside London and the South East could benefit, aligning with broader regional development goals.

• Future readiness: Investing in digital tools ensures that SMEs are not left behind as the economy evolves.

However, the road ahead will not be easy. According to recent MoD data, the proportion of defence contracts awarded to SMEs has declined slightly in some areas. gov.uk Execution, transparency, and sustained political will will be crucial.

What It Means for SME Owners

For small business owners, these developments could open doors. If the new hub and support mechanisms work as intended, more firms could bid for defence contracts, offering high-tech or niche capabilities. Meanwhile, simplified procurement and better digital support could make public contracts and productivity tools more accessible.
But it will require action: businesses will need to stay informed, build capacity, and possibly collaborate with other SMEs to take full advantage of the opportunities ahead.