MoD launches team to back British small businesses

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Known as the Defence Office for Small Business Growth (OfSBG), it will be made up of policy and commercial expert staff, who will support small and medium UK firms to bid for and win more defence contracts. The ambition is to reverse the decline in Ministry of Defence (MoD) spend on SMEs, as identified in the Defence Industrial Strategy.

This will also help deliver on the Government’s pledge to increase defence spending with SMEs by 50% by 2028 and is a significant vote of confidence in around 12,000 SMEs across the UK, marking an important step in removing barriers faced by SMEs at a crucial time for national security and innovation.

The team will help to simplify and speed up cumbersome processes, provide advice to SMEs and encourage private sector investment, supporting the Defence Secretary John Healey’s pledge to make Britain the best place in the world to start and grow a defence business.

The OfSBG will oversee a comprehensive programme of change, ranging from policy and commercial process simplification – such as improving cash flow when under contract – to encouraging private investment by providing long-term clarity on procurements. This work is in addition to enhancing transparency and knowledge sharing within the sector, all aimed at backing British SMEs.

As well as visiting the National Manufacturing Institute Scotland, which backs the manufacturing of innovative technology, Minister Pollard also visited SMEs on Monday, including Viper::Blast, based in Aberdour, who specialise in fast, high-fidelity simulation of air blast, explosive detonations and structural loading.

Minister for Defence Readiness and Industry, Luke Pollard MP, said: "Small businesses told us defence procurement was too slow, too complex and too hard to navigate. We listened and now we’re acting.

"We’re breaking down barriers and opening new avenues for innovation. We are ensuring that our SMEs can play a vital role in strengthening our defence capabilities.

"Defence is an engine for growth, and small businesses are the backbone of UK defence. This is a collective endeavour, and we are committed to supporting British businesses, enhancing our security and driving prosperity for working people across the country."

Scottish Secretary Douglas Alexander said: "The creation of the Defence Office for Small Business Growth is great news for Scottish businesses, workers and the economy as it will help boost opportunities and access to investment, supported by our pledge to increase spending with SMEs by £2.5 billion by May 2028.

"Defence is already a key driver for renewal in Scotland, with the Ministry of Defence spending more than £2 billion a year with the sector in Scotland, supporting nearly 12,000 industry jobs. Now with our historic uplift in spending to protect our own and European security and this new support for small and medium enterprises we will further transform the sector.

"As we up our game on defence, Scotland’s world class industry and supply chain and global demand for Scottish expertise will play a big role in ensuring Britain’s security, deterring our adversaries and driving economic growth for years to come."

UK SMEs saw £1.2 billion of direct investment from the MoD in 2024/25. To make defence even more of an engine for growth, the Government has set an SME spend target of an additional £2.5 billion through to May 2028, taking total MoD spending with SMEs to £7.5 billion.

For both new and existing suppliers, the OfSBG will act as a central hub for advice and support on engaging with defence, ensuring procurement processes are faster, simpler and more effective. Services include structured guidance on tendering, contracting and working with the MoD and wider defence supply chain, mentoring schemes, networking opportunities with prime contractors, signposting to regional defence clusters and trade associations, and a confidential channel for SMEs to raise concerns.

A public-facing web portal and contact centre will initially support 30 SMEs, from carefully selected sectors, covering cyber to aeronautical engineering and covering the whole of the UK from the south coast of England to Scotland, Wales and Northern Ireland. They represent a cross section of industry including those who have previously worked with the MoD and those who are new, ensuring industry is supplying the best of British capabilities to defence. These companies will help rapidly test, trial and refine the service before planned expansion to embrace the wider business community over the coming weeks and months.

National Armaments Director, Rupert Pearce, said: "SMEs are the backbone of UK defence, bringing the innovation, agility and fresh thinking that our Armed Forces need to stay ahead of evolving threats.

"A more vibrant SME supply chain means better capability for our Armed Forces, greater resilience in our industrial base and economic growth for communities across the country. I look forward to working with businesses of all sizes to deliver on this ambition.

"By working across defence, government and with private investors, we will build a dynamic ecosystem of innovative, well-capitalised small businesses ready to deliver the capabilities our Armed Forces need."

The work of the OfSBG will be reinforced by the newly introduced SME Commercial Pathway, providing clear, accessible guidance to ensure MoD teams are actively reducing barriers and increasing opportunities for SMEs to bid for and win MoD work.

The Pathway covers improved market engagement, reserving below-threshold procurements for SMEs, segmenting contracts to enable greater participation, engaging with prime contractors to manage SMEs within their supply chains and strengthening SME resilience through improved cash flow when under contract.

The OfSBG will collaborate across defence, government departments, strategic partners and private investors to create a dynamic UK ecosystem of well-capitalised, high-growth small businesses.

These businesses will be encouraged to enter the defence market and contribute to rapidly delivering warfighting readiness to the UK Armed Forces, which is a key pillar of the Strategic Defence Review.

This government is delivering the largest sustained increase in Defence spending since the end of the Cold War – hitting 2.6% of GDP from 2027. That will see £270 billion invested into defence across this Parliament. Increased investment in Small and Medium enterprises will ensure defence is an engine for growth in all the regions of the UK.

Oliver Thompson, Director of Engineering at MarineAI, said: "This is a decision that we absolutely champion. Speaking of the marine sector, in which we operate, there are many home grown and world-class technological innovations that have failed to reach the water due to cumbersome procurement processes and layers of bureaucracy. By lessening the red tape and providing additional guidance for SMEs, the UK’s marine operations and capabilities will reach their potential, benefiting both SME sized businesses and the country’s defence overall."

Matthew Ratsey, MD of ZeroUSV, said: "The reality is that the Navy/MoD has made huge strides with the set up of Commercial X. However anything which further helps SME’s access funding in a reduced timescale is critical to the target of delivering innovation at pace and at scale, and assisting "short handed" SME’s with the contractual processes, and is very welcome indeed. Speed of access to authorised contract funding is critical to the SME led supply chain as they don’t have the financial resources, or the ability to take additional risk in commencing contracts without the kick off funding. This action should help ensure that it is not the finance element of delivering innovation which is holding back the government’s desire to implement delivering technology at pace and at scale."

Naomi Hulme, CEO & Co-Founder, Skyral, said: “This fund signals the MoD’s recognition of a reality British SMEs have always known. We are capable of delivering cutting-edge capabilities faster and more efficiently than traditional procurement models allow. The question is now one of execution. Accelerated procurement only matters if proven technologies make it into service, not just more pilots that stall after the initial development. If this fund creates genuine pathways from contract to deployed capability, it will turn defence spending into genuine advantage for our personnel. That’s how procurement reform yields true impact."