A new report by Babcock and the University of Exeter argues that small and medium sized enterprises could play a significantly larger role in strengthening UK defence resilience, but warns that structural barriers continue to limit their participation.
The study, The Next Line of Defence: Unlocking SME Potential in UK Defence from Policy to Practice, identifies a series of obstacles that SMEs face when attempting to work within the defence sector, including complex procurement processes, inconsistent contracting approaches and limited access to long term funding.
Despite repeated government commitments to widen industrial participation, SMEs currently account for around four percent of UK defence spending. The report suggests this constrains both capability development and the wider economic benefits that could flow from defence investment at regional and local level.
The authors outline six priority areas for reform, ranging from simplifying procurement and modernising infrastructure to building a more stable skills pipeline and protecting sovereign capability. Central to the report is the argument that existing processes often favour larger firms by default, even where smaller companies may be better placed to deliver niche technologies at pace.
Among the proposals are calls for more proportionate contracting models, requirements better aligned to SME scale and a shift in the role of prime contractors from gatekeepers towards long term partners. The report also highlights the need for more patient finance, warning that short funding cycles discourage smaller firms from committing to defence work.
Alongside the publication, Babcock confirmed that an industry led SME Charter is expected to be launched in the coming months. The proposed charter is intended to encourage greater consistency in how SMEs are engaged across the defence sector, though details of its implementation have not yet been published.
Donna Sinnick, Babcock’s Chief Delivery Officer, said SMEs had become increasingly important as defence timelines compress, stating: “In the time critical defence environment, SMEs can deliver niche technologies fast. They are agile and essential to building sovereign resilience in areas like AI, cyber and autonomy.” She added that while progress had been made, “we still have to collectively do even more.”
Professor Harry Pitts, Deputy Director of the Centre for the Public Understanding of Defence and Security at the University of Exeter, said the research reflected the growing gap between policy ambition and delivery. “A new policy landscape promises to remove barriers so that Britain’s SMEs can help UK Defence meet these challenges,” he said, but added that “a joint effort across industry and Government is required to put policy into practice.”
SME’s can’t generate jobs for the boys and ultimately that’s what the forces are interested in. You can’t attract the “proper” kind of people from the right schools unless they can have nice big fat consultancy roles waiting for them to use all their “knowledge” on.
This is why we ended up with so many US defence contractors in the Army where US aerospace companies magically dominate British army land acquisition programs for a decade.
Even though these companies don’t make vehicles even for the US army.
It says a lot if a major UK defence prime is saying more needs to be done to encourage and support SME to participate in the defence procurement system and well done Babcock. Although, the cynic in me wonders if they would be focusing on SME as part of their supply chain rather than wider participation in the system i.e. as potential competitors..?
The trouble is the overly risk adverse HMT rules which, given the MoD’s lamentable procurement record are perhaps understandable as far as intent is concerned, actually make the situation worse! It is about time that the MoD and HMT got together and sorted out an agreed way forward because frankly it will be too late once the missiles start knocking down NHS hospitals, factories, schools, military bases, etc. with little or nothing to stop them.
Cheers CR
CR, I definitely concur with your statement. Time and time again I have seen SME’s either excluded because they are “new to the game”, or aren’t sitting on a massive pot of money with turnover in the millions.
Also there needs to be a streamlining/ cull of some of the documentation required, when in “Defence Terms” the value is peanuts (maybe less than £1M ). SME’s dont have Bid Teams who have both the time and experience to to complete reams and reams of documents, that will just sit on a shelf following submission and a cursory review by the relevant DE&S Commercial Team. Time spent doing this is Non-Productive and SME’s struggle to justify doing it when there appears to be little to no chance of getting selected. They then end up being “sub-contracted” by the Big players who screw them to the floor, pay the barest minimum and often late
This comes around regularly every 5 years or so for the last 30. Politicians make pronuncments and the reality bites and it all quietly goes away again. The hard truth is that SME’s don’t have the capital to compete and its not the job of the MoD to act as venture capital for companies whose risk profiles render them univestable for conventional capital sources. If you allow politicians to chose to “invest” in businesses you end with Ferguson Marine’s ferries quicker than you can say Jack Robinson. Politicians will use taxpayers money for political reasons unless there’s a framework to stop them. There’s a reason why there has been a procurement act for the last 30 odd years.