This second article in the series ahead of the 2026 Specialist Defence and Security Convention UK (SDSC-UK) builds on the themes of defence reform and acquisition performance explored in Article 1, turning from policy intent to the practical realities of delivery. It focuses on how defence can better leverage the strengths of UK-based Small and Medium Enterprises (SMEs), and the commercial and operational frictions that must be addressed if the ambitions of the Defence Industrial Strategy (DIS) are to be realised at scale. While the government’s commitment to significantly increase defence spending with SMEs is welcome, translating that ambition into operationally relevant capability will depend less on targets and rhetoric, and more on how procurement processes, risk allocation and engagement models function in practice.
The government’s stated ambition to increase defence spending with SMEs by £2.5 billion by May 2028 – equating to a 50% increase against FY 2023/24 – is both welcome and eye-catching. However, achieving this target will require more than incremental change – it will demand meaningful adaptation by both the Ministry of Defence (MOD) and industry. Importantly though, these targets should be seen as an enabling measure rather than an outcome in themselves. Success must ultimately be judged by the timely delivery of operationally relevant capability rather than spend alone.
Why SMEs matter
Before considering some of the areas that procurement reform must address, it is worth restating why SMEs are so central to defence’s future ambitions. These benefits should provide a ‘north star’ against which procurement reform measures should be judged prior to implementation.
Innovation and agility. With the pace of technological change accelerating, SMEs are often able to bring novel solutions to defence problem-sets more rapidly than larger organisations. Their scale allows for faster decision making and a greater ability to pivot in response to evolving operational demands or niche requirements.
Supply chain resilience and sovereignty. A more diverse supplier base reduces reliance on a small number of large contractors and strengthens national resilience. Integrating SMEs more effectively into defence supply chains supports sovereign capability and mitigates strategic risk.
Economic growth and regional prosperity. Defence SMEs are significant contributors to local economies, supporting skilled employment and regional growth across the UK.
Value for money. While the Procurement Act 2023 has shifted the emphasis from Most Economically Advantageous Tender (MEAT) to Most Advantageous Tender (MAT), value for money remains central. SMEs can often deliver highly specialised solutions more cost-effectively, particularly at the component or subsystem level.
These benefits are real, but they also highlight an important reality: SMEs rarely deliver complete pan-Defence Lines of Development capability solutions. More often, they operate at the level of components, subsystems, or enabling technologies – hardware, software, or a combination of both. This creates a fundamental commercial tension.
Direct contracting or working through primes
SMEs are frequently faced with a strategic choice: pursue direct MOD contracts or operate as subcontractors within prime-led programmes.
Direct contracting offers greater visibility, influence, and potential for growth, but it comes with demanding entry criteria, significant bidding overheads and direct competition with established prime contractors. Subcontracting can provide a more accessible route to market, but may limit strategic autonomy, margins, and long-term scalability.
Neither model is inherently right or wrong. However, if defence is serious about increasing SME participation at scale, commercial models must better reflect the realities of how SMEs operate and contribute.
Structural challenges for SMEs
Several persistent challenges continue to inhibit SME participation in defence procurement.
Complex and resource-intensive bidding processes. Many procurement processes remain optimised for larger organisations, imposing disproportionate cost and time burdens on SMEs. As a result, many SMEs focus their engagement on lower-value, lower Technology Readiness Level (TRL) opportunities, often through organisations such as Dstl or DASA. While these routes are valuable for early-stage innovation, defence has yet to establish consistently effective mechanisms to ‘pull through’ successful technologies into funded programmes. Too often, SMEs that have demonstrated credible prototypes find themselves competing in later-stage procurements where scale, balance sheet strength, or risk transfer requirements work against them. A genuinely segmented procurement model is essential to address this gap. A segmented procurement model does not imply guaranteed pull-through for SMEs, but rather proportionate competition, assurance and risk allocation that is aligned to the maturity and criticality of the capability being procured.
Access to users and problem owners. Understanding defence problems, users, and operational context remains a significant barrier. SMEs need more persistent and structured engagement models, rather than episodic industry days or competitions. The challenge is one of scale: progress against SME targets could significantly increase the number of firms seeking engagement, as illustrated by the more than 300 applicants for the Digital Targeting Web industry day in August 2025. Meaningful engagement also requires access to classified information. This, in turn, implies a need for support to help SMEs meet security requirements, both in terms of facilities and personnel, and for Collaborative Working Environments (CWEs) where classified dialogue with users and procurement staff can occur more routinely.
Framework contracts: access versus exclusion. Frameworks have been used increasingly to improve accessibility and flexibility for the MOD, providing umbrella arrangements without committing to volume or timing upfront. They bring clear benefits in terms of efficiency, governance and value for money but their growing presence highlights the need to balance transactional efficiency with openness to new entrants and emerging capability. Their proliferation risks overburdening SMEs, many of whom lack the resources to bid for multiple frameworks or the insight to prioritise effectively. Once established, frameworks can remain closed for several years, excluding new entrants and potentially limiting access to emerging or more innovative solutions.
Test, evaluation and reference environments. SMEs often lack access to persistent, ‘always-on’ test and reference environments for both hardware and software. Without these, proving performance, integration and assurance becomes slower, riskier and more expensive.
Scaling at pace. By definition, SMEs have limited manufacturing capacity and facilities. Success on direct MOD contracts frequently requires evidence of an ability to scale production rapidly –something that is difficult to demonstrate without committed demand or investment. This creates a circular dependency that commercial models must help to break.
Opportunities for change
Despite these challenges, there are clear opportunities to improve alignment between policy ambition and commercial reality.
The Defence Industrial Strategy (DIS) and the establishment of the Office for Small Business Growth provide an opportunity to bring coherence, advocacy and practical support for SMEs across defence. Success will depend on whether these initiatives can influence day-to-day commercial behaviour, not just policy intent.
The Procurement Act 2023 introduces greater flexibility through its emphasis on MAT, social value and considerations of UK sovereignty. Used well, these levers could enable more proportionate risk allocation and better recognition of SME strengths.
Defence exports also remain a critical opportunity. Active MOD support for exports should be seen as part of a broader national prosperity agenda. UK-based SMEs often possess world-class expertise, and a contract with the UK MOD can act as a powerful ‘kite mark’ in overseas markets, provided exportability is considered early and supported coherently.
Conclusion
There are no simple answers. Increasing SME participation in defence is not merely a matter of policy targets or funding uplifts; it requires commercial models that reflect how SMEs innovate, scale and manage risk.
SDSC-UK 26 is the principal UK event focused on the requirements of specialist defence user communities and SMEs. It will provide an important forum to explore these issues in depth. With representation from across the MOD and senior leadership in attendance, the conference offers SMEs a rare opportunity to inform and shape this debate.
Author’s note
These articles are written from a practitioner’s perspective, drawing on experience in defence capability development and engagement with industry. They are intended to stimulate informed debate rather than prescribe solutions, and to support constructive dialogue between defence, SMEs and prime contractors. Key insights and reflections arising from discussion at SDSC-UK 26 will be captured and shared with defence leadership to help inform the ongoing implementation of defence reform.
About the author
Maj Gen (Retd) Robin Anderton‑Brown is a former Director of Capability at UK Strategic Command and Multi‑Domain Integration Programme Director. He is now Director of Allium Associates Ltd, an outcome‑focused consultancy that helps connect industry and defence. Robin is also a strategic advisor and ambassador for SDSC‑UK.
