£7.4bn Government pledge—but will small firms see a penny?

Billions are being promised to Britain’s small businesses—but will the smallest see any of it? Ministers say a £7.4bn spending push will boost jobs and power local growth, with departments forced to hand more contracts to SMEs than ever before. But critics warn it could be déjà vu, with medium-sized firms snapping up the lion’s share while microbusinesses are left battling red tape, impossible requirements and a system stacked against them. The money may be there—but getting it into the right hands is another matter entirely.

Photo by Nick Kane on Unsplash

Government departments have, for the first time, set individual targets for spending with small businesses:

• Small businesses across the country are set to benefit from over £7.4 billion of Government money a year by 2028

• Departments have, for the first time, set individual targets for the amount they will spend with small businesses, boosting economic growth and delivering on the Plan for Small Business.

• There’s a new requirement to publish yearly progress updates to ensure departments stay on track.

The aim is to boost local communities and create jobs. The government wants to empower business to drive growth and wealth across Britain saying a thriving private sector creates opportunities for people to get good jobs. The money will go to businesses across the country, including key sectors cyber, manufacturing, finance and science.

Will small and micro businesses struggling to overcome the procurement barriers really see a change? It’s probable medium sized firms will benefit and again the crucial small and micro businesses will struggle to feel any benefit. All previous attempts have failed.

Ken Cole runs SPS Consultancy and has 50 years of experience of public sector procurement. He says:
“Successive governments have failed to meet their targets for awarding business to small businesses. This is because what actually happens is medium sized firms are the main beneficiaries and the small and micro businesses will struggle to feel any benefit. The £7.4bn SME procurement target is a big political signal, but on its own it will not fix the structural barriers that keep micro and small businesses locked out of government contracts.”

The new targets aim to see Government departments spending more money with small and medium sized businesses, so they can grow themselves and grow the economy.

This is in addition to small business spending from the Ministry of Defence which will increase by a further £2.5 billion, to £7.5 billion by May 2028.

While the targets are for direct spending, billions more also go through supply chains, meaning the overall amount for small businesses could be even higher. However, making more money available and setting targets doesn’t mean more money will reach the ‘small’ of SME.

1. More money available doesn’t mean more money accessible

Government can set targets, but small businesses still face:

• Complex procurement portals

• Long, technical tender documents

• Requirements written for large suppliers

• Excessive insurance thresholds

• Frameworks that are closed for years

• Scoring systems that favour incumbents

Unless these change, the £7.4bn will still flow disproportionately to medium‑sized firms, not microbusinesses.

2. The biggest barrier remains process, not opportunity nor will

Even when contracts are “SME‑friendly”, microbusinesses struggle with:

• Time required to bid

• Lack of bid‑writing capacity

• Unclear evaluation criteria

• Mandatory policies (ESG, cyber, safeguarding, carbon reporting) that are disproportionate for a business with 1 to 10 people

• Payment terms that still stretch to 60–90 days in reality, despite the rules

Targets don’t simplify the process. Reform does.

3. Departments will now be held publicly accountable which should be a meaningful shift

Because departments must publish annual progress reports, you should see:

• More pressure on commercial teams to actively seek small suppliers

• More “small‑only” or “small‑first” lots

• More market‑engagement events

• More pre‑market consultations

• More use of dynamic purchasing systems (DPS) that allow rolling entry

This is where microbusinesses can benefit if they are visible and ready but if the phrase SME is constantly used the bias will continue to be towards medium sized businesses which have little in common with micro-businesses.

4. The Procurement Act changes matter more than the target

The Act introduces:

• Simplified procedures

• More transparency

• More open frameworks

• Greater ability to challenge unfair decisions

• A requirement to consider small business participation

These structural changes will do more to open doors than the £7.4bn headline.

5. The Ministry of Defence uplift (£2.5bn) is significant but MoD procurement is notoriously complex

MoD is one of the hardest environments for microbusinesses because of:

• Security clearances

• Long contracting cycles

• High insurance requirements

• Technical specifications

The uplift is real, but the accessibility challenge remains for small businesses.

6. The sectors highlighted (cyber, manufacturing, finance, science, construction) favour small businesses with technical capability

This is good news for:

• Cyber businesses

• Specialist construction firms

• Niche manufacturers

• Data and finance innovators

But it does not automatically help:

• Salons

• Florists

• Local service providers

• Micro‑retail

• Care staffing agencies

• Creative freelancers

These sectors will still need targeted procurement reform to benefit.

7. The biggest risk: “small and micro washing”

Departments may:

• Award more contracts to medium‑sized firms (50–249 employees)

• Count supply‑chain spend as “small engagement”

• Create SME‑only lots that are still too big for small and microbusinesses

• Hit targets without changing accessibility

This isn’t a new phenomenon in public procurement.

8. The biggest opportunity: early movers will benefit

Microbusinesses that:

• Get onto the right frameworks

• Build relationships with procurement teams

• Attend market‑engagement events

• Partner with larger suppliers

• Offer niche, specialist, or localised services

…will be in a strong position as departments scramble to meet targets.

What this really means for microbusinesses?

Short term (0–12 months)

• More engagement events

• More SME‑only lots

• Slightly easier access to information

• No major change in win rates yet

Medium term (1–3 years)

• More open frameworks

• More dynamic purchasing systems

• More direct awards under simplified procedures

• Better visibility of opportunities

Long term (3+ years)

• If the Procurement Act is implemented well: Microbusinesses could finally see meaningful access to public contracts.

• If not: The £7.4bn target will be met mostly by medium‑sized firms, not the smallest businesses.

Previous businesses to win government contracts include UMi, based in Durham which was chosen to run the Business Support Service, and Logan Construction in the South East which has won a number of government construction contracts. The targets are there to help to rebalance government spending from big international companies and put it into the pockets of hardworking communities in the UK, boosting local growth and creating new jobs.

Last year, the Government launched its flagship Small Business Plan, which included the most significant legislation to tackle the scourge of late payments in over 25 years and a massive £4 billion finance boost to break down barriers to accessing funding.

While the aims are clear and laudable, it seems that many of the businesses involved are far from micro or even small and it’s at that level that jobs are really created and those are the ones that add social value to their local communities.