The UK Government has announced a major initiative to support small and medium enterprises (SMEs) in the defence sector, ensuring they benefit from the country’s historic increase in defence spending.
A new Defence SME Hub will be established to help small businesses access the defence supply chain, with the Ministry of Defence (MOD) setting direct SME spending targets by June this year.
The move follows the Government’s commitment to increasing defence spending to 2.5% of GDP by 2027, with a further ambition to reach 3% in the next Parliament.
The Government has stated that this investment will bolster national security, create new jobs, and drive economic growth across the country.
The initiative, say Labour, aims to increase SME involvement in the UK defence sector, which has historically been dominated by large contractors. Currently, only 4% of MOD spending goes to SMEs, despite nearly 70% of overall defence spending supporting businesses outside London and the South East.
The new SME Hub will provide:
- Guidance for small businesses on entering the defence supply chain
- Support to raise finance and train workers
- Increased access to government defence contracts
Prime Minister Keir Starmer highlighted the economic benefits of increased defence spending, stating: “The UK’s defence industry is a source of national pride. It supports hundreds of thousands of good jobs up and down the country and represents British manufacturing at its best. Increasing our investment in defence is not only bolstering our national security, but it is also an opportunity to put more money into working people’s pockets and boost economic growth.”
The initiative will have a major impact on Scotland, where the MOD currently spends £2.14 billion annually, including £32 million with SMEs, directly supporting more than 11,000 jobs.
Scottish Secretary Ian Murray underlined the significance of Scotland’s role in the plan:
“The Prime Minister has been clear – we must up our game on defence. Scotland’s world-class defence industry will play a big role in meeting that challenge.”
He added:
“Driving economic growth and ensuring our national security are UK Government priorities. The skills, expertise and innovation in Scotland’s defence industry will play an increasingly crucial role in delivering our Plan for Change, and keeping our country safe.”
Defence Secretary John Healey commented on the Government’s ambition to make defence an engine for economic growth, saying:
“For too long small businesses felt locked out of defence, but we’ve listened and we’re acting. Today’s announcement will ensure that smaller firms benefit from increased defence spending, attracting new suppliers and fast-tracking the technologies of the future into the hands of our Armed Forces.”
The Government has also highlighted the regional impact of defence spending, pointing to significant increases in defence investment across the UK, including a 30% rise in the East Midlands (£328 million) and a 20% increase in Northern Ireland.
