News

Public Bodies Urged to ‘Maximise’ SME Procurement Spend: What This Means for Small Businesses

Public Bodies Urged to ‘Maximise’ SME Procurement Spend: What This Means for Small Businesses

In a significant move to support the growth of small and medium-sized enterprises (SMEs), the UK government has announced new guidelines aimed at increasing procurement spending with these businesses. As part of a broader push to promote diversity and fairness in public sector contracts, ministers have ordered that public bodies significantly boost their procurement spend with SMEs and voluntary or community-based organizations.

A New Directive for Public Procurement

On 20 February 2025, the Cabinet Office released a national procurement policy statement that explicitly instructs public bodies to “maximise” the proportion of their budgets allocated to SMEs. This new directive is designed to ensure that SMEs — which make up the backbone of the UK economy — are given more opportunities to compete for and win government contracts.

Public procurement is a significant area of business activity, with billions of pounds spent annually by local and central government departments, the NHS, education institutions, and other public bodies. For many smaller firms, securing a public sector contract can provide much-needed revenue and help drive long-term growth. However, SMEs have historically faced challenges in accessing these contracts, often due to the size and complexity of procurement processes.

What Does This Mean for SMEs?

This shift in government policy presents a major opportunity for SMEs looking to break into the public sector. By actively encouraging public bodies to prioritize SME spending, the government is aiming to level the playing field and create more opportunities for smaller businesses to thrive.

For SMEs, this could mean:

  • Increased Access to Public Contracts: With the new policy in place, SMEs can expect more tailored opportunities to bid for contracts across a range of sectors, from construction to IT services, and beyond.

  • Less Bureaucratic Red Tape: One of the biggest barriers for small businesses in public procurement has been the complex and often lengthy tendering process. With a focus on SMEs, there is likely to be a push for simplified procedures that are more accessible to smaller firms.

  • Competitive Advantage: SMEs that are able to offer specialized services or innovative solutions may find themselves in a stronger position when bidding for public contracts. Public bodies are keen to foster diversity in their supply chains, and this means SMEs could be seen as a valuable resource.

The Role of Voluntary and Community Organizations

While the emphasis is on SMEs, the new procurement rules also place importance on voluntary, community, and social enterprises (VCSEs). The government recognizes that these organizations often provide valuable services in areas like social care, education, and environmental sustainability, and they too will benefit from an increase in procurement spending directed towards them.

This means that SMEs and VCSEs have an opportunity to partner on projects, collaborate on bids, and expand their reach into new sectors.

The Bigger Picture: A Shift Towards Inclusive Procurement

This move is part of a broader government strategy to create a more inclusive and competitive public procurement landscape. By encouraging more public sector spending with SMEs, the government is looking to:

  • Stimulate Local Economies: SMEs are often rooted in local communities, and by directing spending to them, public bodies can help strengthen regional economies.

  • Promote Innovation: SMEs are typically more agile and innovative compared to larger firms. Encouraging them to compete for public contracts can help drive new ideas and solutions in areas like digital transformation, sustainability, and public service delivery.

  • Ensure Fair Competition: By leveling the playing field, public bodies are ensuring that more businesses have the chance to contribute to public services, which ultimately benefits taxpayers and public service users.

What Can SMEs Do to Take Advantage?

While the new guidelines are promising, SMEs need to be proactive to take full advantage of the opportunities available. Here are a few tips:

  1. Stay Informed: Keep up to date with new procurement opportunities. Many public bodies post tenders on platforms like Contracts Finder, so regular monitoring is essential.

  2. Streamline Bidding Processes: Review and refine your internal processes for bidding on public contracts. Ensure that your business is able to submit clear, compelling bids on time.

  3. Look for Collaboration Opportunities: Consider partnering with other SMEs or VCSEs to combine your strengths and increase your chances of winning larger contracts.

  4. Ensure Compliance: Public procurement often involves strict rules regarding transparency, equality, and sustainability. Ensure your business complies with these regulations to avoid losing out on opportunities.

  5. Utilize Support Networks: Many trade associations and business organizations offer advice, training, and support for SMEs looking to enter public procurement. Take advantage of these resources.

Conclusion

The UK government’s new procurement policy represents a significant step forward in ensuring that small businesses are given the opportunity to compete for and win public sector contracts. For SMEs, this is a golden opportunity to secure valuable contracts and grow their businesses. As public bodies are now encouraged to maximize their spend with smaller firms, the door is wide open for those ready to step up and engage with the public sector.

If you run an SME, now is the time to prepare your business for the future of public procurement — more opportunities are on the horizon, and the government is committed to giving you the tools to succeed.