Government sets first-ever departmental SME spending targets

Every government department has now published its own target for how much it will spend directly with small businesses.

It is the first time this has happened, and the headline number is over £7.4 billion a year by 2028. 

The targets vary widely. The Department for Science, Innovation and Technology leads at 40%, followed by DCMS at 33% and the Cabinet Office at 30%. Nearly half of the departments have set a target above 20%. 

The Ministry of Defence sits separately, targeting £7.5 billion in direct and indirect SME spend by May 2028, a 50% increase on 2023-24. Billions more flow through supply chains on top of those direct figures. 

Each target has been signed off by the relevant minister, as required by PPN 001. Departments must publish yearly progress updates, and those that fall behind will need to set out how they plan to improve. The SME hub publishes each department's action plan. 

The targets form part of the government's Plan for Small Business, which also includes late payment legislation and a £4 billion finance boost. 

More money earmarked, but fewer ways in 

Here is where it gets complicated. The Procurement Act 2023 came into force in February 2025 and has reshaped how public sector buying works. Data from Tussell's first-year review of the new regime shows what has changed on the ground. 

The number of published tenders, the contracts you can actually see and bid for, fell across 2025. Weekly averages dropped from 503 to 393. They are recovering in 2026, but have not returned to previous levels.  

Meanwhile, a new type of activity has exploded. Buyers are now publishing thousands of "pipeline" and "market engagement" notices, signals that tell suppliers a contract is being planned but is not yet open for bids. In 12 months, 16,380 of these were published, almost matching the 16,401 actual tenders.  

However, this can mean that by the time a tender goes live, the buyers may already know who they want to work with. 

One in five larger contracts now uses a new process that lets buyers add extra stages, such as interviews, site visits or negotiations, before picking a winner. That gives buyers more flexibility, but it also means longer timelines and could mean higher costs for the businesses bidding. 

Some contracts are being ring-fenced for SMEs and social enterprises, which is encouraging, though the numbers are still small. And social value, how your work benefits the wider community, is becoming a bigger part of how bids are scored, featuring in over 40% of tender criteria in some sectors. 

Looking ahead, Tussell expects open frameworks (including G-Cloud 15) to take a bigger share of the market, published performance ratings on contracts over £5 million, and new central government spending targets for social enterprises later this year. 

What this actually means if you run a small business 

Picture a small IT consultancy in Birmingham. The government has just committed that DSIT will spend 40% of its budget with SMEs. That is a genuine opportunity. But to access it, that consultancy now needs to spot a pipeline notice months before the tender appears, respond to a market engagement exercise to get on the buyer's radar, then navigate a multi-stage bidding process that could take months and cost thousands in staff time. 

The money is being earmarked. But the system for accessing it has become more complex, not less. And small firms without dedicated bid teams or procurement expertise are at risk of being shut out of exactly the opportunities designed for them. 

VIDEO: How one SME won and built a successful client relationship

Discover how Solution One successfully navigated the procurement process with a large corporate organisation and became a trusted supplier:

Getting started with Supply Connect 

Supply Connect exists to close that gap. It is a national pilot run by Enterprise Nation and Newable, supported by JPMorganChase, that connects small businesses directly with the large firms delivering public sector contracts. 

The programme sits on the Enterprise Nation platform, reaching over a million small businesses a year. It includes contract matching, onboarding support covering insurance, cyber security and ESG, bid writing training, and Meet the Buyer events with procurement leads. 

Since launching in September 2025, 801 small businesses have signed up, 357 have completed supply-readiness diagnostics, and 236 are already listed as fit to supply.  

On 24 March, the same day the government published its spending targets, Supply Connect brought public and private sector procurement leads together for its first SME Supply Chain Forum to turn the policy commitments into practical next steps. 

The long-term goal is straightforward. The government should publish transparent procurement pipelines and set clear expectations for how large contractors spend flow down to smaller firms. And large suppliers should simplify how they find, assess, and onboard SMEs into their supply chains. 

If you want to get your business into public sector supply chains while the door is open, sign up to Supply Connect. 

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