£7.4bn in government contracts to be awarded to small businesses by 2028

SMEs across the UK are set to benefit from over £7.4bn in Government spending by 2028, as ministers reveal ambitious new procurement targets.

The move aims to give smaller businesses better access to contracts and expand opportunities for smaller firms across the country.

This boost in Government spending comes at a time when confidence among Britain’s small business leaders has been faltering, particularly with growing concerns around rising operational costs, business rates, and interest rates.

With this funding, the Government is aiming to strengthen local economies, create new roles, and provide a much-needed boost to business confidence through an uncertain period.

Why supporting small businesses matters

In a press release published yesterday, the Government announced that SMEs will benefit from over £7.4bn of funding by 2028. This includes key sectors like manufacturing, finance, and science. Additionally, small business spending from the Ministry of Defence will also increase by a further £2.5bn.

This comes following the launch of its Small Business Plan last year, which introduced new initiatives to support small businesses. As well as additional funding, the Government is also introducing tougher reforms on late payments and a new Business Growth Service to help SMEs find the right advice and support.

According to the Federation of Small Businesses (FSB), SME confidence declined rapidly in the final quarter of 2025. The Small Business Index (SBI) dropped to -71, meaning that there were more businesses struggling than succeeding. Small businesses with 1-9 employees were particularly impacted, reporting a -85 confidence score.

As a result, businesses have been forced to cut back on growth, with 37% planning to reduce investment levels next quarter, while 23% plan to carry out workplace redundancies.

Government spending targets for SMEs

For the first time, departments have set individual targets for the amount they will spend with SMEs. Yearly progress updates will also be published to ensure they are held accountable, including setting out improvements if they fall behind.

Government departments have set ambitious SMEs spending targets – 40% from the Department for Science, Innovation and Technology (DSIT), 33% from the Department for Culture, Media, and Sport (DCMS), and 30% from the Cabinet Office.

Nearly half of all departments aim to spend more than one-fifth of their budgets directly with small businesses. This means that for every £5 spent, at least £1 goes straight to an SME.

Small Business Minister, Blair McDougall, comments: “These new targets will ensure thousands of smaller businesses have greater opportunity to win lucrative government contracts and grow their businesses.

“As outlined in our Plan for Small Business, increasing procurement and spend with SMEs is a national priority to drive growth across the UK, and through today’s changes we’re delivering on that.”

Next steps for small business growth

Over the coming years, these measures are expected to strengthen SMEs, reduce the UK’s high unemployment rate through job creation, and boost the country’s overall economic resilience.

It could also give SMEs some more hope in these challenging times, particularly as only 38% of businesses reported feeling optimistic about the UK’s economy at the start of 2026 – a significant decrease from 51% the previous year. Economic uncertainty was also reported as a main concern for 44% of businesses.

“These ambitious spending targets will help ensure more Government contracts go to SMEs – keeping more money, jobs and opportunities in local communities.” Cabinet Office Minister, Chris Ward, says. 

“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.”