Smaller defense firms to get easier access to MoD contracts under new growth unit

Small British defense companies will have easier access to Ministry of Defense contracts after the government launched a unit dedicated to streamlining procurement and improving spending with smaller suppliers.

The Department of Defense has launched the Defense Office of Small Business Growth, a new service designed to cut through what ministers describe as labyrinthine procurement processes that have historically shut small and medium-sized enterprises (SMEs) out of the defense market.

Announcing the plan, Luke Pollard, the defense and industry minister, said the government wanted to redirect more defense spending to British firms and trusted allies.

“In the most difficult times, being able to deliver more of our supplies to Britain, or to friendly NATO partners, is very important in building our readiness to fight the blockade,” Pollard said. “Any military is only as strong as the industry behind it.”

From February, thousands of small defense businesses will be able to receive guidance from trade experts through a new office, as well as a “confidential channel” that allows firms to voice their concerns about their treatment by government buyers or major contractors.

Pollard said previous procurement processes tended to favor large overseas suppliers, with sufficient UK content. “There are many opportunities for small businessmen to be part of that power by selling more of their products, and making it easier for them to do that,” he said.

This program is part of a broader plan to reverse the long-term decline in SME participation in defense procurement. The MoD currently spends around £5 billion a year with around 12,000 SMEs working in the UK defense sector. Ministers now want to increase that figure by 50 per cent, equivalent to an extra £2.5 billion a year, by May 2028.

According to MoD estimates, direct and indirect spending by British SMEs will drop from 25 percent to 20 percent of the £29 billion the department will spend with UK companies by 2024. In comparison, the United States Department of Defense spends more than 40 percent of its budget on SMEs, under the mandated guidelines.

Pollard acknowledged that the procurement culture within the MoD will need to change if those targets are to be met. He said the Ministry intends to significantly shorten contract periods, as agreements that take an average of five years to be agreed have been reduced to two years, two-year procedures have been reduced to one, and annual negotiations have been shortened to months.

The announcement comes amid scrutiny of the MoD’s growing use of non-competitive procurement. The department said 49 percent of the number of new contracts awarded in the year to April 2025 were awarded without competitive tenders, the highest rate since 2016.

The ministers argued that increasing the participation of SMEs will strengthen supply chain sustainability and innovation, especially as defense costs rise. The government has committed to increasing defense spending to 2.6 percent of GDP by 2027, creating what Pollard described as an opportunity to “rebalance” the benefits of that investment.

The MoD said the Defense Office for Small Business Growth will play a key role in ensuring that future increases in defense spending translate into more opportunities for small British companies, rather than being held primarily by large international contractors.