There's a line in the MOD's new SME Action Plan that most policy documents wouldn't dare include. Its own director acknowledges that some readers will think they've heard it all before and that nothing has changed. Whether this time proves different is a fair question, but the numbers behind the plan are harder to ignore.
Published on 21 July 2026 and led by the newly established Defence Office for Small Business Growth, the plan sets out how the Ministry of Defence intends to increase what it spends with smaller suppliers by 50% by summer 2028. The MOD already works with around 12,000 SMEs through its supply chain, so this isn't a niche part of the defence market. For any SME already in the defence supply chain, or thinking about entering it, that's worth understanding properly.
The headline target and what sits behind it
Defence currently spends around £5 billion a year with SMEs. The commitment is to add £2.5 billion to that by summer 2028, bringing the total to roughly £7.5 billion annually. It builds directly on the commitments made in the Defence Industrial Strategy and in the Defence Investment Plan.
The split behind that figure matters more than the headline. Only around a quarter of current SME spend reaches smaller businesses through direct MOD contracts. The remaining three quarters flows indirectly through the supply chains of larger suppliers.
The published targets reflect this. By 2027/28, the MOD is aiming for:
- £2 billion in direct SME spend
- £5.5 billion in indirect SME spend
In other words, most of the growth is expected to flow through primes and wider supply chains rather than straight from the department. That has real implications for where smaller suppliers should be focusing their business development effort.
The four strategic objectives
The plan is built around four objectives, and it's worth reading them as a statement of where the pressure is being applied:
- Simplifying processes from concept to contract.
- Increasing total SME spend by 50% by summer 2028.
- Improving the diversity and resilience of the defence supply chain through better practices from Defence and its major suppliers.
- Delivering through local networks, including regional defence and security clusters, academia and local government.
The third of these is particularly relevant if your route into defence is through a larger supplier.
Starting from Q2, the MOD intends to establish a Strategic Partners and Suppliers pledge designed, where possible, to align SME action plans, spend projections and support across the department and its strategic suppliers. It also plans to expand its SME Champions network among strategic partners.
These aren't binding requirements guaranteeing SMEs a particular share of a prime's work. They do, however, signal greater expectations around how major defence suppliers engage with and develop smaller businesses in their supply chains. If you already subcontract to a major defence supplier, expect this agenda to start reaching further into those relationships.
What's actually available now
Several things in the plan have already gone live rather than sitting on a roadmap. The Defence Office for Small Business Growth was established in January 2026, and its contact centre, website and anonymous helpline are all operating.
The wider MOD procurement guidance says the Office is intended to give SMEs a confidential channel to raise concerns or discuss challenges they face. The anonymous route also gives smaller suppliers a way to flag barriers without having to attach their identity to the evidence they provide.
The SME Commercial Pathway is also public. It brings together commercial approaches that MOD teams can use to reduce barriers for smaller suppliers, including appropriate use of below-threshold procurement, earlier market engagement and segmenting requirements so SMEs have a more realistic opportunity to participate.
Beyond that, the wider ecosystem includes:
- UK Defence Innovation, for SMEs, start-ups and non-traditional suppliers developing new capabilities
- Commercial X, which focuses on accelerating digital and innovative procurement
- Dstl's Co-Creation Portal, which helps businesses work with Defence on science and technology challenges
- regional defence and security clusters, which form part of the MOD's local support network
Commercial X itself can support contracts of up to £50 million and under two years in duration, so it shouldn't be thought of simply as a route for very small contracts. The full SME Action Plan brings these routes together.
The milestones to watch
The plan sequences much of its activity across Q1 to Q4, which gives suppliers a useful indication of the order in which changes are intended to develop.
Early priorities include reducing duplicated paperwork and challenging disproportionate contract terms. The next stages include mapping MOD entry points and marketplaces, improving visibility of upcoming opportunities, and reviewing areas such as social value, offsets, consortia bids and open frameworks. Later actions include more digital tools designed to help SMEs navigate defence procurement and access support without needing direct assistance every time.
There's also an accountability thread running through the plan. Internal SME spending targets are being set across MOD portfolios, with performance monitored and escalated where required. The plan also commits to providing constructive feedback on unsuccessful SME bids. For smaller suppliers, that could be particularly useful where understanding why a bid fell short is essential to improving the next submission.
What smaller suppliers should do now
The practical question is where to put your effort. A few things stand out.
Register properly and look beyond live notices
The Defence Sourcing Portal is the baseline for advertised MOD requirements, but it shouldn't be the only place you look. The MOD Acquisition Pipeline provides a forward view of potential procurement activity and frameworks. It doesn't guarantee that an opportunity will proceed, but it can give suppliers a much earlier indication of where the MOD expects future requirements to emerge.
The Defence Office for Small Business Growth's support offer also covers areas such as procurement and commercial advice, business enablement, regulatory and compliance readiness and routes into export markets.
Regional defence and security clusters are worth understanding too. The Action Plan explicitly sees local networks as part of the route through which national SME policy will be delivered.
Take the indirect route seriously
Given that around three quarters of current SME spend flows through wider supply chains, understanding how to win work in the defence sector increasingly means understanding how major suppliers structure their own supply chains, not just watching for published MOD notices.
The MOD itself lists a group of strategic suppliers including BAE Systems, Babcock, Leonardo, Thales, QinetiQ, Rolls-Royce, MBDA, Serco and others, and encourages these suppliers to advertise subcontracting opportunities through the Defence Sourcing Portal.
For some SMEs, therefore, the realistic route into a major defence programme will be prime → subcontractor, rather than SME → MOD. That means identifying which primes are involved in the programmes relevant to your capability, understanding how they onboard suppliers and engaging before a specific work package appears.
Get your evidence base in order before you need it
The case studies in the Action Plan share a common thread: SMEs that could move quickly and demonstrate capability credibly.
One example is North Product Design Studio, a Lancashire design and engineering consultancy engaged by BAE Systems to produce an avionics display prototype for the Typhoon programme. The project was completed in three months against a projected internal delivery time of twelve. That's exactly the kind of evidence smaller suppliers need to capture as they go.
Don't wait for a tender to start reconstructing project outcomes. Build usable case studies covering:
- what the requirement was
- what you delivered
- how quickly you delivered it
- the technical or operational challenge involved
- measurable results
- what your involvement enabled the customer to do
A strong SME proposition isn't simply “we're agile”. It's being able to demonstrate where that agility has produced a better outcome.
Don't treat defence as a completely separate bidding world
Defence has its own structures, terminology and routes to market, but many of the fundamentals that apply when SMEs bid for public sector contracts more generally still matter.
The Action Plan specifically identifies the flexibilities available through the Procurement Act 2023 as one of the tools MOD can use to speed up procurement and reduce barriers. The MOD's wider reforms also include new procurement segmentation intended to match the procurement approach more closely to the scale and complexity of the requirement.
That doesn't mean every defence opportunity follows one standard procurement route. Suppliers still need to understand whether an opportunity is coming directly from MOD, through a framework, through an innovation programme or via the supply chain of an existing strategic supplier.
A realistic note
It's worth keeping perspective. Direct SME spend in 2024/25 was £1.24 billion, against total MOD procurement spend of £31.6 billion. The Action Plan's own table still lists 2024/25 indirect SME spend as “to be confirmed”, along with several other historic figures.
The ambition is real and, importantly, the plan now attaches named actions, spending targets and phased milestones to it. But the gap between intent and delivery is exactly what the plan's own foreword acknowledges. Tim Ketton-Locke describes the programme as a long-term transformation rather than an overnight fix.
For suppliers, that argues for treating the Action Plan as a genuine opening rather than a guarantee. The businesses most likely to benefit are those already positioning themselves while spending targets are being set, procurement routes are being adjusted and relationships with the wider SME ecosystem are being strengthened.
How Thornton & Lowe can help
Defence is one of the harder sectors to break into, and capability alone doesn't guarantee that you'll find the right route to market.
At Thornton & Lowe, we help smaller businesses build a realistic route into defence, whether that's identifying the right opportunities, understanding which buyers and primes to target, strengthening your evidence base or improving how your team approaches bids over time.
If the SME Action Plan has prompted you to take defence more seriously, we're happy to talk through where your organisation realistically fits. Our Tender Pipeline tool is also worth using to keep track of live and upcoming defence opportunities alongside the longer-term market intelligence you can gather from MOD pipelines and supplier engagement.
