Government Unveils Reforms to Boost SME Access to Public Sector Contracts

The UK government has announced new procurement guidance aimed at making it easier for small and medium-sized enterprises (SMEs) to secure a greater share of the £400 billion spent annually on public sector goods and services.

Set to take effect on 24 February, the national procurement policy urges 20,000 public agencies to simplify the tendering process for SMEs, as well as voluntary, community, and social enterprises. The initiative seeks to cut bureaucracy, encourage social change, and help smaller businesses compete for government contracts.

The Cabinet Office has directed public sector buyers to “maximise procurement spend” with SMEs while maintaining value for money and quality. The reforms align with broader economic growth efforts and could open billions of pounds in opportunities for smaller firms.

Currently, SMEs receive about 20% of public procurement spending, but the government hopes that the 2023 Procurement Act—coming into effect at the end of the month—will enhance transparency and potentially save over £4 billion annually, according to the National Audit Office.

“Businesses tell me that the current system isn’t working. It is slow, complicated, and too often means small businesses in this country are shut out of public sector contracts. These measures will change that,” a government spokesperson stated.

Additionally, the new rules mandate government departments to conduct spot checks ensuring large suppliers pay subcontractors within 30 days. A newly introduced “public interest” test will assess whether contracts should be outsourced or delivered in-house for better efficiency and value for money.

The Cabinet Office is also exploring ways to empower local councils to prioritize SMEs in their communities over national suppliers, even when larger firms offer lower prices.

Emma Jones, chief executive of Enterprise Nation, praised the reforms, stating: “By setting new standards in creating social value and reinforcing 30-day payment terms, this new approach could see many more opportunities opening up for the UK’s small business community to grow.”

Calls for expanding SME procurement further have been growing. A Goldman Sachs report released this week urged the government to increase SME-awarded contracts to 40% by 2030. The Institute for Government noted that SME public sector spending remained stagnant at 20% between 2018 and 2023, indicating significant room for improvement.

Jones emphasized that reserving contracts for small businesses could provide a major boost to local economies by fostering innovation, sustainability, and job creation across the UK.

With these new measures in place, small businesses will be watching closely to see if the reforms translate into tangible opportunities in the public procurement landscape.