Government procurement reforms to boost UK SMEs, apprenticeships and regional growth

The Government has unveiled new rules designed to support British businesses, strengthen supply chains and create more opportunities for SMEs to win public sector work.

Ministers say the changes are designed to reduce bureaucracy for smaller suppliers while ensuring public spending creates more jobs, apprenticeships and skills in local communities.

Businesses bidding for government contracts – a market worth £90bn per year – will be assessed on their commitment to creating high-quality British jobs, tackling local skills shortages, and supporting young people into apprenticeships and work placements.

Chancellor of the Exchequer John Healey MP said, “I want every government department to be a growth department.

“We have made it a leading priority to back British, not just if possible but by design, so that procurement supports British jobs, British apprenticeships and British innovation.”

Why is the Government changing procurement rules?

The Government says it wants every young person to have the chance to earn or learn. New rules will double the importance of creating local benefits when the government buys goods or services – ensuring spending directly creates training, work experience, and jobs in every postcode.

Under the changes, the score for bringing benefits to the local community will be raised from 10% to 20% for contracts worth £5m or more, ensuring procurement, whether from UK or international providers, helps support communities.

How will the reforms help UK SMEs win contracts?

The changes will also help smaller, scaling and innovative businesses and civil society organisations.

The Government says smaller firms are often locked out of public contracts by complex procurement rules that larger organisations are better equipped to navigate.

The rules have been simplified and the threshold raised to contracts of more than £1 million so they don’t typically apply to the work smaller firms and local social enterprises are bidding for. This will better allow both smaller businesses and civil society to showcase their innovation and the benefits they are already delivering in communities. 

Existing social value requirements in other areas will also be removed, allowing suppliers to focus on employment, skills and local community impact rather than a wider range of assessment criteria.

First Secretary of State Louise Haigh said, “Every pound of taxpayer money should be spent in a way that benefits local communities – creating good jobs and giving young people the skills they need for the future.

“For too long, securing government contracts has been a tick box exercise that fails to deliver the positive change that people feel in their pocket and see in the places they live.

“We are doing things differently. These new rules will ensure the £90 billion that is spent each year through government contracts supports British jobs, skills and people in every postcode.”

Responding to the announcement, Craig Beaumont, Executive Director at the Federation of Small Businesses (FSB) said, “FSB is pleased to have worked with the Government on making social value work better for small businesses. Lifting the threshold to £1 million ought to see many more small firms winning contracts, as small businesses deliver huge intrinsic social value but they can often struggle to demonstrate this in procurement processes.”

How will Government contracts create jobs and apprenticeships?

Bidders can get extra credit for creating local jobs that pay above the legal minimum and treat workers properly, as well as helping to plug local skills gaps by offering training such as 45 days of work experience. These changes will give young people and underrepresented groups a better chance at starting a good career.

Suppliers will be assessed on their commitment to backing British jobs, skills and opportunities, and specifically targeting support for young people not in education, employment or training (NEETs), care leavers and individuals with long-term health conditions.

Craig Wilson, UK CEO, Sopra Steria said, “At the heart of every successful organisation and thriving economy are people. When people have the opportunity to work, learn and grow, the benefits extend far beyond the workplace to families, communities and society as a whole. That’s why we welcome the Government’s focus on creating employment opportunities through public procurement.”

To ensure companies honour their pledges, for major contracts, government departments will allocate a key performance indicator and make annual progress reports available publicly. Suppliers’ performance will be measured against their commitments.

The reforms are part of the Government’s wider Modern Industrial Strategy which aims to encourage innovation, strengthen UK supply chains and support long-term economic growth through public procurement.

When do the new procurement rules take effect?

The new rules will apply to central government procurements from 1 January 2027. More detailed technical guidance will be published this autumn.

Cabinet Office Minister Mark Ferguson said, “We believe that if you benefit from something you have a responsibility to give back.

“These changes will mean that businesses that benefit from the billions of taxpayer pounds spent by Government, will have to create more local jobs and opportunities for young people in their area.”