The Cabinet Office has published department-by-department spending targets for procurement from small and medium-sized enterprises, as part of a drive to increase support for up-and-coming firms.
It said the first-of-their-kind targets will see more than £7.4bn a year flow towards SMEs – classed as firms with fewer than 250 staff and a turnover of £44m or less – by 2027-28, helping to rebalance spending from big international companies and boosting local growth in the process.
The Department for Science, Innovation and Technology has the highest proportion of targeted direct SME spend of any government department: 40% over the next three years.
In second place, as a proportion of its overall procurement spending, is the Department for Culture, Media and Sport, on 33%. The Cabinet Office comes in third at 30%. Nearly half of departments have a target above 20%.
At the other end of the scale is the Department for Transport, at 5.75%. However, the Cabinet Office said DfT Group had a “combined SME spend target” of 33% when both direct and indirect spending are factored in.
Departments have signed off on the targets and will be required to publish yearly progress updates – as well as “robust action plans on how they will improve” if the targets are not met.
A raft of departmental action plans were published today with details on SME spending presented in varying ways.
DSIT did not give a baseline for its previous direct spending with SMEs in its action plan, but did reference its 40% target. DCMS said it spent £266m directly with SMEs in 2024-25, representing 46% of its total procurement spend.
According to the Cabinet Office’s action plan, it spent £200m directly with SMEs in 2024-25 when procurement by its arm’s length bodies and the central department are factored in. The figure represents 22.1% of total procurement.
The Cabinet Office said its expectation that departments will be spending in excess of £7.4bn a year with SMEs by 2027-28 did not include small-business spending from the Ministry of Defence.
The MoD has set a target to increase direct and indirect spending by £2.5bn with SMEs to £7.5bn by May 2028. The Cabinet Office said such an increase in total MoD spend would equate to a 50% increase compared with 2023-24.
Cabinet Office minister Chris Ward said the targets for departmental spending on SMEs were a signal of commitment.
“This government is backing SMEs and British businesses,” he said. “These ambitious spending targets will help ensure more government contracts go to SMEs – keeping more money, jobs and opportunities in local communities. This will make a real difference – and is a statement of intent that this government will pull every lever to support SMEs and drive growth.”
Tina McKenzie, policy chair at the Federation of Small Businesses, said understanding exactly how much central government spends directly with small businesses is essential for holding departments to account.
“The decline in direct SME spend since 2022 shows exactly why these targets matter – as well as the scale of the task ahead,” she said. “It’s important that this announcement is a starting point for more ambitious future spending commitments for 2028 and beyond, particularly as overall spend among the biggest government departments like health, defence and education, is set to rise.”
Cabinet Office transparency data for 2021-22 shows total departmental direct spending with SMEs was £10.2bn, representing 14.2% of total procurement spend. Of that total, the MoD accounted for £949m.