The government has now published new departmental SME procurement targets. This is more than another policy statement. Departments now have named three-year direct spend targets with SMEs, signed off at ministerial level and backed by annual reporting expectations.
For suppliers, the message is straightforward. More departments are under pressure to widen access, reduce barriers and show measurable progress. For businesses that want to win public contracts, that creates a stronger opening to engage earlier, target the right buyers and compete where there is now a clearer reason to broaden the supplier base.
What are the new SME procurement targets?
Under the government’s new guidance on SME spend targets, central government departments, their executive agencies and non-departmental public bodies must set a three-year target for direct spend with SMEs from 1 April 2025 and publish results annually. The same policy note also introduces a two-year direct spend target for VCSEs from 1 April 2026. NHS trusts, foundation trusts and devolved authorities are outside the scope of this particular policy note.
The published departmental targets run to the end of FY 2027/28. They focus on direct spend with SMEs, although departments can also choose to set and report on indirect SME spend voluntarily.
That distinction matters. In some categories, the best opening for smaller suppliers may still come through delivery partnerships, subcontracting or supply chain positions rather than a direct prime contract.
Headline numbers for suppliers
Some departments have set notably ambitious targets. These include:
- Department for Science, Innovation and Technology: 40%
- Department for Culture, Media and Sport: 33%
- Cabinet Office: 30%
- Department for Energy Security and Net Zero: 29%
- Ministry of Housing, Communities and Local Government: 27.5%
Others are lower on direct spend, including the Department for Education at 10%, the Home Office at 10%, HMRC at 8%, DWP at 8% and the Department for Transport at 5.75%.
That should not be read as a reason to ignore those buyers. Departmental spend profiles vary, and in some areas a large share of SME involvement may still sit in the wider supply chain rather than in direct prime contracting.
There are also broader signals beyond the direct-spend table. The Ministry of Defence says it wants to increase direct and indirect spending with SMEs by £2.5 billion to reach £7.5 billion by May 2028, while the Department for Transport Group has set a combined SME spend target of 33% across direct and indirect spend.
Taken together, that points to a wider push to increase SME participation, whether through direct contracts or through supply chains.
Why this matters now
This announcement arrives in a wider reform environment that is already meant to make public procurement easier for smaller businesses to access. The Procurement Act 2023 introduced a duty for contracting authorities to have regard to SME participation and consider reducing barriers to entry. Government guidance has also highlighted:
- greater visibility of upcoming opportunities
- more preliminary market engagement
- a ban on requiring certain insurance before contract award
- 30-day payment terms through the public sector supply chain
Targets create accountability. Reform creates some of the practical tools buyers can use to act on it. Together, they increase the chances of more SME-friendly route-to-market decisions, more proportionate selection criteria and more serious early engagement before a tender goes live.
The commercial logic is clear enough. SMEs make up the overwhelming majority of the UK business base, and government clearly wants more of that market to have a fairer opportunity to compete for public contracts.
Contact the public sector procurement experts
Get bidding support for SMEsWhere the opportunities are likely to open up
Some of the clearest opportunities will come where departments need to increase direct SME participation relatively quickly. That can mean more attention on lot structure, category strategy and how opportunities are packaged. It can also mean more active pre-market engagement, so buyers can understand whether capable SME providers are available before they choose the final procurement route.
For suppliers, this is a good time to sharpen how you track pipelines and decide where to focus. Businesses that understand where to find public sector opportunities early, and how to position around likely upcoming requirements, will be in a stronger place than those waiting for the contract notice alone.
Framework access is another area to watch. Departments and arm’s-length bodies will still use established commercial routes, so suppliers need a realistic plan for both direct tenders and public sector procurement frameworks. In many sectors, getting onto the right framework agreements remains one of the fastest ways to improve visibility and turn policy momentum into genuine contracting opportunity.
There is also a supply-chain angle that should not be overlooked. Lower direct-spend targets do not automatically mean low opportunity. In some areas, large integrators and incumbent primes will remain central, but they may face more pressure to demonstrate meaningful SME delivery, specialist subcontracting and stronger payment practices across the chain.
More opportunity does not mean easier wins
The first step is not to bid for everything. It is to target more intelligently.
Look at which departments have set ambitious targets and compare that with where your offer is already credible, differentiated and easy to evidence. A focused pipeline is usually far more effective than a broad one.
The second step is preparation. If buyers are expected to engage SMEs more seriously, suppliers need the right response ready. That means clear capability statements, strong case studies, credible pricing logic, compliance evidence and a sensible view on whether to bid as prime or as part of a consortium or subcontractor network.
The third step is bid quality. New opportunities are only useful if you can convert them. That is where structured bid writing support and more specialist tender support for SMEs can make a real difference. Thornton & Lowe works with suppliers that want more than generic advice. We help turn procurement change into stronger positioning, better submissions and more consistent bidding outcomes.
What procurement teams should take from this
For procurement teams, the publication of these targets raises the bar. It is no longer enough to say SME participation matters in principle. Buyers now need to show progress against published targets, and that usually starts well before the tender stage.
In practice, that means reviewing market engagement, route-to-market choices, lotting strategy, timescales, barriers in selection criteria and the evidence gathered during contract management. It also means asking whether current procurement models genuinely widen access or simply preserve the status quo under a new label.
Where in-house teams are stretched, external support can help create capacity without losing control. Thornton & Lowe supports organisations that need expert delivery across procurement planning, tender development and commercial process management, while staying grounded in what current rules and targets are trying to achieve.
Thornton & Lowe’s view
Our view is simple. The new targets are a positive move, but targets alone will not transform the market.
They matter because they create visibility and accountability. They give suppliers a clearer signal about where departments may be under pressure to widen participation. They also give procurement teams a stronger reason to challenge overly rigid, risk-averse or outdated ways of buying.
But they do not guarantee fair access by themselves. Suppliers will still need to be findable, credible and ready to bid. Buyers will still need to design procurements that genuinely remove friction rather than simply talk about inclusion. That gap between policy intention and contract award is where strategy matters most.
At Thornton & Lowe, we see the best results when suppliers act early. That means building a pipeline around realistic targets, improving bid readiness and making better decisions about when to bid direct, when to partner and when to invest in long-term framework positioning.
Common questions about the new SME procurement targets
Do these targets guarantee more contracts for SMEs?
No. They increase pressure on departments to improve direct SME spend and publish progress, but they do not reserve contracts for smaller suppliers. Businesses still need a clear offer, a compliant response and the right bidding strategy.
Are the targets only about direct spend?
The published departmental table is for direct SME spend. Departments can also set indirect targets voluntarily, and some already signal broader ambitions around total SME participation.
Which organisations are covered?
The policy note applies to central government departments, executive agencies and non-departmental public bodies in scope. It does not apply to NHS trusts, foundation trusts or contracting authorities with devolved functions in Scotland, Wales or Northern Ireland.
Should suppliers focus only on departments with the highest percentages?
Not necessarily. Higher targets can point to stronger short-term opportunity, but lower direct targets may still hide good routes in the supply chain or through established commercial vehicles. The best approach is to match buyer need, route to market and your own delivery strength.
Turning policy into contract wins
The publication of these new SME procurement targets is a useful signal, not a finish line. It shows suppliers where pressure is building and where new conversations may open up. The businesses most likely to benefit will be the ones that respond with focus, evidence and a serious bidding plan.
Thornton & Lowe helps organisations do exactly that. Whether you need bid writing support, hands-on tender support for SMEs, guidance on public sector procurement frameworks or a clearer view of the changing market, we combine expert support with practical delivery. If you want to turn this policy shift into a stronger pipeline and better win rates, we're ready to help.
