Around 12,000 small and medium-sized enterprises (SMEs) work in the defence and national security supply chain, yet they receive only around 4% of UK defence spending. This disparity limits both sovereign defence capability and the economic dividend that increased defence investment might otherwise deliver, according to a recent study.
The government has responded by setting a target to increase defence spending with SMEs by 50% by 2028, equivalent to an additional £2.5bn and a 50% uplift in direct/indirect spending compared with FY 2023/24. Whether this ambition is achievable – let alone on time – is a question the sector is openly debating, not least because the DIP intended to underpin it remains unpublished.
In the meantime, industry is moving ahead with its own measures. Babcock has launched a 10-point charter designed to overcome a procurement process described by Luke Pollard, the minister for defence readiness and industry, as “too slow, too complex and too hard to navigate”.
The charter intends to streamline engagement and contracting by publishing clearer demand signals to match SMEs to opportunities earlier. It also pledges mentoring and access to secure testbeds for R&D trials, fair payment terms (95% of invoices within 30 days), assurances on IP protection, and – perhaps most notably – publicly tracked reporting on progress. Contracts, Babcock says, will be awarded on agility and merit rather than incumbent status or company size.
Donna Sinnick, Babcock’s chief delivery officer, says that SMEs bring capabilities the larger defence primes cannot replicate. “Injecting niche capabilities, creativity and pace, SMEs provide some of the key ingredients for maintaining a modern, sovereign and technologically superior defence capability,” she says.
The charter is one commitment among several now in place, suggesting the desire to reform supply chain engagement runs across most of the major defence players. In March 2025, Leonardo launched its SME Collaboration Partner programme, co-managed with Form1, a B2B technology scale-up agency. The programme is positioned explicitly against what Simon Harwood, Leonardo’s UK capability director, calls “short-term innovation theatre” – a pointed acknowledgement that previous sector approaches have tended to offer generic support with limited access to revenue opportunities.
Thales has structured its approach through two distinct routes: a strategic partnering programme for key suppliers and an innovation track for emerging technologies. The latter is a growing priority. The recently announced Trust My Tech accelerator aims to connect start-ups, scale-ups and tech developers with Thales infrastructure and customers through a series of defined ‘innovation challenges’ – the first targeting compact cyber and electromagnetic solutions, with future challenges tied to emerging customer priorities.
The government’s contribution is the Defence Office for Small Business Growth (OfSBG), established by the Ministry of Defence (MoD) in January 2026. The dedicated team of policy and commercial staff is tasked with helping SMEs bid for and win contracts through structured guidance on tendering and networking, as well as providing a confidential channel for SMEs to raise concerns about the procurement process. A public-facing web portal and contact centre will initially support 30 SMEs from “carefully selected sectors”, from cyber to aeronautical engineering. This inaugural cohort will trial and refine the service before it is opened to others.
The OfSBG will work in tandem with the MoD’s newly introduced SME Commercial Pathway, which includes reserving below-threshold contracts exclusively for smaller businesses and segmenting larger contracts to enable broader participation – two measures that, if implemented consistently, would represent a more structural intervention than previous initiatives.
Make UK Defence, which represents nearly 900 UK manufacturers, has also published new guidance for SMEs on navigating routes to market, accessing finance and meeting accreditation requirements. Its director-general, Andrew Kinniburgh, has been among the more candid voices on whether ambition will translate into contracts.
Presenting evidence to the House of Commons Defence Committee on 24 March, Kinniburgh was among several sector representatives warning of the “procurement paralysis” arising from continued delay to the DIP. “The problem for SMEs is that they are now desperately trying to hang on to their people and keep their factories alive,” Kinniburgh told the committee. “They are bleeding cash; there is cash out of the door every day to feed the baby birds, and they are simply on pause.”
He described a conversation with one electronic sub-contract manufacturer, who was having to decide whether to go into administration now and walk away with the remaining cash or keep paying 30 employees and hope the DIP arrives in time. For all the charters, offices and pathways, that is the calculation smaller suppliers are making today.
Want the best engineering stories delivered straight to your inbox? The Professional Engineering newsletter gives you vital updates on the most cutting-edge engineering and exciting new job opportunities. To sign up, click here.
Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.