Commons Sense

House of Commons · Ministers' Questions

Defence Procurement: SMEs

Monday 19 May 2025 · 7 questions

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Answered 1 Partly answered 6 Not answered 0

Key points

  • Ministerial statements acknowledged the rapid change in warfare capabilities and the need for a dynamic SME sector.
  • The percentage of Ministry of Defence direct expenditure going to SMEs fell from 5% to 4% under the previous government.
  • The government plans to set a new target for direct defence investment in SMEs, with every 1% increase worth 250 million more for small firms.

Topics (select to filter)

Questions & Answers

Q1 Jeevun Sandher Lab Loughborough
Defence Business & Trade
Context

The MP noted the evolving nature of warfare, with low-cost drones capable of destroying expensive tanks within months. He highlighted the financial challenges faced by defence SMEs due to a lack of long-term contracts and guarantees.

Question

In today’s world warfare is changing dramatically. Drones costing $1,000 can destroy tanks worth $10 million, but the innovation cycle for those drones is rapid; they are designed to become obsolete within months. We need a dynamic SME sector to produce those drones, but defence SMEs are struggling to get the finance they need, with a lack of long-term contracts and a lack of guarantees. A multilateral defence bank could help to ensure that those firms get the finance they need. Will the Secretary of State please set out the discussions he is having to help to found that multilateral defence bank?

Answer from The Secretary of State for Defence (John Healey)

My hon. Friend is quite right about the fact that capabilities are now changing in weeks, not months or even years. He is also right about finance. That is why I went to the London stock exchange last week and closed the markets—I think it was the first time a Defence Secretary has ever done that. I wanted to signal that this Government want a new partnership with not just industry and innovators, but investors, and that means changing the way in which defence does its work.

Partly answered

Not addressed: The Secretary of State did not provide details on discussions for establishing a multilateral defence bank or addressed the lack of long-term contracts and guarantees mentioned by the MP.

How: Changing The Subject To Recent Actions

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Q2 Luke Charters Lab York Outer
Defence Business & Trade
Context

The MP highlighted that under the previous government, the percentage of Ministry of Defence direct expenditure going to SMEs fell from 5% to 4%. He sought clarity on when this Government expect to surpass that record.

Question

I have met outstanding UK SMEs, such as Supacat, 4GD and many others, which contribute to the sovereign industrial base that our security depends on. However, under the last Government, the percentage of Ministry of Defence direct expenditure going to SMEs fell, from 5% to 4%. Will my right hon. Friend confirm when this Government expect to surpass that record and therefore back the innovation we need to equip our forces and support our allies?

Answer from The Secretary of State for Defence (John Healey)

I congratulate and thank my hon. Friend, as well as my hon. Friend the Member for Aldershot (Alex Baker), for the work that they are doing on innovative finance, which will help SMEs in future. I can confirm that SME involvement in the defence supply chain will be boosted by new spending targets that I will set in June to produce exactly the sort of result that my hon. Friend the Member for York Outer (Mr Charters) is looking for.

Partly answered

Not addressed: The Secretary of State did not provide a specific timeline or percentage target but confirmed new spending targets would be set in June.

How: Changing The Subject To Future Goals

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Q3 Catherine Atkinson Lab Derby North
Defence Business & Trade
Context

The MP spoke at the Make UK Defence summit in Derby, meeting with local defence SMEs. She highlighted issues such as accessing finance to grow and complicated defence procurement processes.

Question

When I spoke at the Make UK Defence summit in Derby, I met with lots of small and medium-sized businesses in the sector. The issues that they raised with me were echoed during my visit last week to a local composites manufacturer, Pentaxia, including accessing finance to grow and complicated defence procurement processes. What is the Defence Secretary doing to engage with small and medium-sized companies to ensure that they can get a fair crack at Government defence contracts?

Answer from The Secretary of State for Defence (John Healey)

My hon. Friend knows better than most the challenge for small firms entering into the supply chain in defence, and she does more than most to champion their case. We want defence to do business differently, and making it easier for small firms and newer entrants to start doing their business with defence a big part of that. That is why we have announced a new SME support centre—a new front door for small firms that can then become part of the defence supply chain, unlocking new jobs and putting more money in the pockets of workers.

Partly answered

Not addressed: The Secretary of State did not directly address complicated procurement processes or financing issues raised by the MP but mentioned a support centre for SMEs.

How: Changing The Subject To New Initiatives

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Q4 Baggy Shanker Labour (Co-op) Derby South
Defence Business & Trade
Context

The MP highlighted that nearly 70% of Government defence spending is directed towards businesses outside London and the south-east, emphasizing its job-creation potential in areas like Derby.

Question

Earlier this year, I had the pleasure of hosting a roundtable and listening to businesses in Derby—small and medium-sized businesses in engineering and manufacturing, including the vital defence sector. With nearly 70% of Government defence spending directed towards businesses outside of London and the south-east, we know how every pound spent with UK defence businesses has the power to create jobs and employment for local people. Will the Secretary of State therefore outline how the Department will ensure that as many SMEs as possible are aware of Government procurement opportunities, so that they can deliver jobs in areas such as Derby?

Answer from The Secretary of State for Defence (John Healey)

My hon. Friend makes an important point. The access of SMEs to defence is very often through primes and subcontracting, rather than directly with the Ministry of Defence itself. It is the certainty of long-term relationships and long-term contracts for the primes that allow them to pass those benefits on to smaller firms. That is why it is significant that when my hon. Friend joined me at the Derby Rolls-Royce factory when I announced the eight-year £9 billion Unity contract for Rolls-Royce, 240 small firms were part of that submarine supply chain.

Partly answered

Not addressed: The Secretary of State did not provide specific measures to ensure SMEs are aware of procurement opportunities but highlighted a significant contract involving multiple SMEs.

How: Changing The Subject To Existing Contracts

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Q5 Sarah Dyke Lib Dem Glastonbury and Somerton
Defence Business & Trade
Context

Somerset is home to growing defence sector SMEs like Needles and Pins Aerospace, which supplies Leonardo helicopters. The question addresses specific support these companies need to compete for defence procurement contracts.

Question

What support is the Minister providing to SMEs such as Needles and Pins to ensure that they can compete for defence procurement contracts?

Answer from John Healey (The Secretary of State for Defence)

Next month we will set a target for direct defence investment in SMEs. Every 1% more of defence spending we put into SMEs is worth £250 million more for those small firms.

Answered
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Q6 Tim Farron Lib Dem Westmorland and Lonsdale
Defence Business & Trade
Context

Currently, only 4% of defence procurement goes to the SME sector. The question addresses the need for accessible procurement portals and processes for smaller businesses.

Question

Does he recognise that part of the problem with SMEs getting defence contracts is not just the amount of money but that the procurement portals and processes need to be accessible for smaller businesses? What can he say about that?

Answer from John Healey (The Secretary of State for Defence)

First, the new SME support centre will help with those sorts of challenges. Secondly, the hon. Member is right to point to that low 4% level of direct defence spending into SMEs, which was under the last Government.

Partly answered

Not addressed: specific steps for making procurement portals and processes accessible

How: Referring To Past Government'S Record

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Q7 James Cartlidge Con South Suffolk
Defence
Context

The question addresses the replacement of jet trainers and highlights the importance of British design, manufacturing, jobs, technology, and innovation in the context of supporting British industry.

Question

Given that one of the publicly stated roles of the Red Arrows is “supporting British industry”, will the Secretary of State guarantee that the next jet for the Red Arrows will be designed and manufactured in the United Kingdom?

Answer from John Healey (The Secretary of State for Defence)

As a former procurement Minister, I know that the replacement of our jet trainer is long overdue. This Government looks to direct British taxpayers’ defence investment to British-based firms, jobs, technology, and innovation.

Partly answered

Not addressed: specific guarantee for UK design and manufacture

How: Highlighting Government Commitment Without Concrete Guarantees

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