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Posted: Wed 5th Aug 2026
5 min read
Small businesses are set to benefit from a major overhaul of government procurement rules.
These significant changes will make creating British jobs and training opportunities twice as important when awarding contracts worth a combined £90 billion a year.
From January 2027, companies bidding for public sector work will be judged heavily on their commitment to tackling local skills shortages, offering apprenticeships and providing work placements for young people.
The weighting given to community benefits will double from 10% to 20% for contracts worth £5 million or more.
The shake-up will also sweep away layers of bureaucracy that have locked smaller firms out of lucrative government work.
The threshold for complex procurement requirements will be raised to contracts worth more than £1 million, exempting most of the work that smaller businesses and social enterprises typically bid for.
Maggie Berry OBE, SME procurement lead at Enterprise Nation, says the new social value procurement model could change the way larger contractors approach their social value commitments.
"The real difference this should usher in is big businesses buying from small businesses locally as part of their social value approach.
"Buying from locally based SMEs should be part of how larger contractors demonstrate their commitment to community benefits under these new rules."
Maggie says the higher threshold was a pragmatic move that recognised the realities of running a small business. She adds:
"For smaller opportunities, SMEs don't necessarily need to be thinking about social value formally.
"That's a really good thing because it's quite difficult for small businesses to create jobs or take on apprenticeships at scale to compete for contracts.
"If you're a small business with a staff of five, you're probably not going to hire a new person just to meet procurement criteria.
"If you did, it might be a part-time role. And taking on an apprenticeship when you're that small creates real challenges around staff capacity and supervision."
Companies will earn extra credit for creating jobs that pay above minimum wage and treat workers properly, as well as offering training packages such as 45 days of work experience.
The rules specifically target support for:
young people not in education, employment or training (NEET)
care leavers
people with long-term health conditions
To stop companies making empty promises, major contracts will include key performance indicators (KPIs), with suppliers' progress published in annual reports.
Performance will be measured against commitments to make sure companies honour their pledges.
The reforms come as data shows public procurement from the private sector has surged by more than a third in five years, reaching nearly £400 billion in 2024/2025.
Yet the share going directly to SMEs has flatlined at around 20% for each of the past six years, despite SMEs representing 99.9% of UK businesses.
That imbalance is precisely what programmes like Supply Connect are designed to address.
Its SME supplier hub – which Enterprise Nation and Newable launched eight months ago with support from JPMorganChase – has already signed up more than 1,000 small businesses, with early participants winning contracts worth tens of thousands of pounds.
Around 37% of businesses registered on Supply Connect are female-owned, while 41% come from Black, Asian and ethnic minority backgrounds.
The platform is reaching communities that public sector supply chains have historically underrepresented.
Maggie adds that the large number of registrations showed genuine appetite for public sector work.
"More than 1,000 businesses signing up in six months tells us small firms want access to these opportunities.
"When they're given the right tools and guidance, they can compete and win in markets that previously felt out of reach.
"These new government rules should make that landscape even more accessible, particularly for businesses already creating real value in their local communities."
Cabinet Office Minister Mark Ferguson says the changes reflect a simple principle:
"If you benefit from something, you have a responsibility to give back.
"These changes will mean that businesses that benefit from the billions of taxpayer pounds spent by government will have to create more local jobs and opportunities for young people in their area."
The reforms support the Prime Minister's ambition to deliver growth and opportunity in every postcode.
In the West Midlands, the regional mayor is using the new social value principles to develop a preventative approach supporting young people into employment through the 3,000 Futures initiative, building on the region's Youth Guarantee Trailblazer.
The changes form part of a broader package backing British jobs and communities by protecting national security, cutting waste and boosting local economies, while supporting the Modern Industrial Strategy's aim to drive long-term investment in skills and resilient supply chains.
Detailed technical guidance will be published in autumn 2026, with implementation taking effect from 1 January 2027.
Public sector contracts aren't just for the big players. With the government actively encouraging SMEs to take part, your business could be exactly what buyers are looking for. Register now
