Government sets first-ever department-by-department SME spending targets: £7.4bn a year by 2028

What the government has actually announced

On 24 March 2026, the Cabinet Office published a single document setting out, for the first time, individual three-year spending targets for each central government department covering direct spend with small and medium-sized enterprises. Together, those targets are intended to push direct SME spending to over £7.4 billion a year by the end of the 2027/28 financial year. The Ministry of Defence sits outside that headline figure with a separate commitment to lift its own SME spending by a further £2.5 billion to reach £7.5 billion by May 2028.

The mechanism is straightforward. Each department has signed off a percentage target, accompanied by an SME Action Plan running from 2025 to 2028. Departments must publish annual progress updates from 2026 onwards, and any that fall behind are required to set out the corrective actions they will take. The full table is available at gov.uk under Departmental Small Business Procurement Targets, alongside each department's individual action plan accessible through the SME hub.

Cabinet Office Minister Chris Ward framed the announcement as a deliberate redirection of public money, saying the targets would help ensure more government contracts go to SMEs and keep money, jobs, and opportunities in local communities. Small Business Minister Blair McDougall said increasing procurement spend with SMEs is a national priority for growth.

The numbers, department by department

The headline targets vary widely. The Department for Science, Innovation and Technology has set the highest at 40% of direct spend, though it has flagged that its target excludes some large programmes deemed unsuitable for SMEs and that the department is mid-restructure. The Department for Culture, Media and Sport sits at 33%, the Cabinet Office at 30%. Around half of all departments have committed to spending more than 20% of their direct procurement budget with SMEs.

Source: Cabinet Office, Departmental Small Business Procurement Targets, 24 March 2026.

For every £5 of direct spend across roughly half of central government, then, at least £1 is now committed to flow to a small business. The Cabinet Office has also been clear that the published targets cover direct spend only. Indirect spending through the supply chains of larger prime contractors brings the total benefit higher, and departments can voluntarily publish indirect targets and report against them annually.

Why it matters now

The targets land against a difficult backdrop for UK small businesses. Confidence has fallen sharply: only 38% of UK businesses reported feeling optimistic about the economy at the start of 2026, down from 51% the previous year, with 44% citing economic uncertainty as a main concern. Direct procurement spend with SMEs has been declining since 2022, and a 2024 study by the British Chambers of Commerce and Tussell found that only 20% of direct procurement spend across the wider public sector reached SMEs.

The legal and policy plumbing behind the targets matters too. The Procurement Act 2023 came into force in February 2025, reforming how public bodies buy goods and services and introducing a single digital platform, Find a Tender, for contract opportunities. The National Procurement Policy Statement of February 2025 and PPN 001 set out the requirement for departments to publish three-year direct spend targets with SMEs from April 2025, with VCSE targets following from April 2026. Today's announcement is the first concrete output of that framework.

The caveats the press release skipped

The headline targets are not as solid as the percentages suggest. The Cabinet Office's own action plan acknowledges that its 30% target is challenging and could be affected by Machinery of Government changes or by status changes among its larger SME suppliers, for instance through acquisitions that lift them above the SME size threshold. The 40% headline figure for DSIT comes with the caveat that the department is in the middle of a major restructure, absorbing the UK Space Agency and Building Digital UK, and will not publish its full SME Action Plan until Autumn 2026.

Independent reaction has been broadly supportive but pointed. Jonny Haseldine, Head of Business Environment policy at the British Chambers of Commerce, called the shake-up long overdue, saying public procurement spend with SMEs has been stuck in a rut and that, although contract values with SMEs have continued to rise, the SME share of the overall pie is still far too small. Tina McKenzie, Policy Chair at the Federation of Small Businesses, welcomed the targets but described them as a starting point, calling for more ambitious commitments beyond 2028, particularly as overall spending in health, defence, and education is set to rise.

One structural feature is also worth flagging. The targets carry no statutory penalty for departments that miss them. Accountability runs through transparency: an underperforming department must publish its shortfall and set out actions for improvement. That makes annual reporting the place where the targets either bite or fade.

What it means for expat-owned UK businesses

The targets apply to any business that meets the standard SME size threshold and is registered to trade in the UK. Ownership nationality is not a factor. An expat founder running a UK limited company, a partnership, or a sole trader business competes for these contracts on the same basis as any other UK SME. For Americans, EU citizens, and others who have built businesses in Britain, the practical effect is a measurable expansion of the public-contract pipeline they can bid into across health, defence, science, finance, and culture.

The starting points are public. Find a Tender publishes all contract opportunities above the relevant thresholds. Individual departments list pipelines and pre-market engagement events on their procurement pages. The Crown Commercial Service, due to be superseded by the Government Commercial Agency from April 2026, runs framework agreements such as G-Cloud and Digital Outcomes that smaller suppliers can join, and HMRC has signed up to the Fair Payment Code with a target of paying 90% of valid SME invoices within five days. None of this means a contract is easy to win, but the routes in are now mapped more clearly than at any point in the last decade.

The announcement is a structural shift rather than a single funding event. Targets, action plans, and annual reporting create a baseline that future ministers will find harder to walk away from than a one-off pledge, and the percentages create a public record against which civil servants can be measured. For the SME sector itself, the question is no longer whether the government wants to buy from small businesses but whether the procurement plumbing actually delivers it.

The first real test will come in spring 2027, when departments publish their first annual progress reports against the targets just set. Those reports will show whether the percentages translated into contracts on the ground or whether, as the Federation of Small Businesses warned, this announcement turns out to have been a starting point that needed considerably more ambition behind it. For expat founders watching from the inside, the practical advice is the same as for any UK SME: get on Find a Tender, register on the relevant frameworks, and take pre-market engagement events seriously, because the people running them now have a number to hit.

Whatever the eventual numbers, the announcement marks a shift in how Whitehall thinks about procurement. For a generation, public buying has gravitated toward a small set of large prime contractors. Setting individual departmental percentages, publishing them, and tying them to action plans is an attempt to turn that trend by treating SME spend as an outcome to be measured rather than a goal to be aspired to. Whether the published 30%, 33%, or 40% figures hold by 2028 is now a live question — and one with real consequences for the small businesses, including expat-owned ones, that the policy is meant to serve.