Ambitious target set for new small business defence contracts and cash supporting Royal Navy, Army and RAF

Prime minister Sir Keir Starmer announced a policy to prioritise small and medium sized enterprises (SMEs) for Ministry of Defence (MoD) contracts. This comes as a plan has been set out to increase defence spending to 2.5 per cent of GDP by 2027. Details on how to spend the funds being considered in the Strategic Defence Review (SDR). This will cover the Royal Navy and other armed forces.

Minister of defence procurement, Maria Eagle, revealed that the aim is to go far beyond current levels of spending with smaller businesses. In response to a parliamentary written question by Conservative MP James Cartlidge, she said: “The Ministry of Defence (MOD) is committed to publishing the target for direct SME spending by June this year.

“The target, covering the period up to 2028, will be challenging but achievable and will be significantly above the current level of MOD direct spending with SMEs of four per cent (£1.3bn annually) in Financial Year 2023-24. Every one per cent increase would mean over £250m of additional direct MOD spending with SMEs annually.”

The government also has plans to launch a new “hub” for SMEs to direct them towards defence contracts. Ms Eagle said plans to create the hub have already begun. She added: “The detail of how the hub will operate be developed in close consultation with industry and wider stakeholders, including companies outside of the existing defence sector. Further detail will be outlined in due course.”

The MoD previously said roughly 12,000 SMEs could be supported by the plans, with many of these supporting the construction of new capabilities for the Royal Navy, Army and RAF. Some of these will be un-crewed systems, with the Royal Navy continuing to prioritise trials for autonomous vessels. One major demonstration saw a Pacific 24 rigid-inflatable craft being remotely controlled from XV Patrick Blackett during trials off the coast of Portsmouth.

Mr Cartlidge, shadow defence secretary, enquired about what steps will be made to allow SMEs for access to ranges for testing un-crewed systems. Ms Eagle responded: “Access to the training estate is already permitted for the testing of un-crewed systems, where does this does not impact upon Military Use.

“Any use of un-crewed systems would be subject to the issue of a Defence Infrastructure Organisation licence. Every request for third party use of the estate is managed through this process.”