UK Small Businesses To Gain From Boost In Defence Spending

Thousands of small businesses in the UK will receive new government support to ensure they benefit from the historic decision to increase defence spending to 2.5% of GDP. This investment will protect UK citizens from threats at home, but also create a secure and stable environment in which businesses can thrive, supporting the Government’s number one mission to deliver economic growth.

The government has today announced its plans to launch a new hub to provide small and medium enterprises (SMEs) with better access to the defence supply chain and committed to set direct SME spending targets for the Ministry of Defence by June this year. This is a chance for small, often family-owned, firms to bring their innovations, their agility and their expert workforce to the task of strengthening Britain’s defences. It will help create new jobs, boosting the economy of small towns and suburbs in the UK.

It follows the Government’s historic uplift in defence spending to 2.5% of GDP by April 2027, with a commitment to hit 3% in the next Parliament. This investment in defence will deliver the stability that underpins economic growth, and will unlock prosperity through new jobs, improving the lives of people in every corner of the UK.

The new hub and investment targets announced today will ensure this increased spending directly benefits SMEs as much as possible – supporting jobs, growth and innovation. This is a vote of confidence in the prospects of up to 12,000 SMEs, supporting them to raise finance and train workers with confidence. It marks further progress to deliver the government’s Plan for Change, putting more money in people’s pockets and rebuilding Britain.

The move is designed to boost the resilience of the UK’s defence industrial base and to seize the full power of rapid technological change as part of the Government’s forthcoming Defence Industrial Strategy.

Nearly 70% of defence spending goes to businesses outside London and the South East, bolstering local economies from Scotland to the North West. However, only 4% of this spending went to SMEs in 2023-2024, which is why the Government is stepping up to provide more support to SMEs and help them get their foot in the door in the defence supply chain. 

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