What record UK defence spending, regional growth, and new MOD support mean for SMEs looking for defence contracts and supply-chain opportunities.
The Ministry of Defence has published its 2025/26 figures on spending with UK industry, and the headline is a record. Government defence spending with UK industry rose 3.2% in real terms to £34.1 billion, the highest level since the statistics began in 2013/14. The figures were announced on 24 September 2026 and the government frames them as part of a wider push to reindustrialise Britain.
For small and medium-sized businesses, the detail matters more than the headline. This article explains what the numbers show, what support now exists for smaller suppliers, and why UK defence procurement deserves a place in your tender pipeline.
What the figures show
Alongside the overall increase, spending in the electronics sector jumped by 33%. That reflects how much modern defence capability now depends on technology, components and digital systems, not just traditional heavy manufacturing. The MOD compares years using constant 2025/26 prices, so the growth is measured after inflation.
The regional picture is just as notable. Northern Ireland recorded the largest percentage rise at 63%, or about £190 million according to the MOD press release. As The Defense Post reports, much of that rise reflected a change in how the MOD assigned spending geographically on contracts for three Royal Fleet Auxiliary support ships. It should therefore not be read as an equivalent increase in new defence activity. The East of England followed with 24.7%, close to £400 million, and the East Midlands came next at 21%, almost £350 million. The full breakdown is in the MOD regional expenditure statistics for 2025/26.
Where SMEs fit in
Direct spending with smaller firms grew by £100 million over the year and now stands at £1.3 billion annually, up from £1.2 billion in 2024/25. The government links this to the Defence Industrial Strategy, which aims to broaden the supply chain and reverse an earlier decline in MOD spending with SMEs.
It helps to keep the numbers in proportion. On our own calculation, SME direct spend is just under 4% of the £34.1 billion total. That is progress, but it also shows how much room there is to grow. The government has pledged to increase defence spending with SMEs by 50% by 2028, which works out at an extra £2.5 billion by May 2028. For smaller firms that know how to find and win contracts, this is a market moving in their favour.
Jobs and the Defence Investment Plan
The employment effect is real. Recent estimates suggest defence spending with UK industry supported 274,000 jobs in 2024/25, an increase of 26,000 on the previous year. Much of that work sits in supply chains, which is exactly where smaller businesses operate.
Looking ahead, the Defence Investment Plan, published on 30 June 2026, commits £298 billion to UK defence over four years. Industry reporting on the plan says annual defence funding is expected to rise from £54 billion to almost £80 billion by 2029, with priorities that include munitions, drones, autonomy and AI-enabled systems. Legal commentary on the plan suggests that cyber readiness, supplier qualification and export controls compliance are likely to be key differentiators for SMEs entering the market. Sustained multi-year investment means more predictable demand, and predictable demand is what lets a small business plan, hire and bid with confidence.
Support available for SMEs
The MOD launched the Defence Office for Small Business Growth in January 2026, starting with 30 pathfinder SMEs. It offers guidance on tendering, mentoring, networking with prime contractors and signposting to regional defence clusters. MOD tender and contract opportunities worth £10,000 or more are listed on the Defence Sourcing Portal, while wider public sector opportunities appear on Contracts Finder and Find a Tender. The MOD also says it aims to pay 90% of undisputed SME invoices within five working days, which matters a great deal for small business cash flow.
The government's Back British approach, which includes a consultation on offset arrangements, is also designed so that UK SMEs benefit when the MOD has to buy from foreign firms.
The Supplierverse perspective
At Supplierverse, we see this as a clear signal for UK SMEs. Defence is no longer a niche corner of public procurement reserved for the largest primes. With record spending, growing SME participation and investment spreading across the regions, more small businesses have a genuine chance to compete, either as direct suppliers or as part of a larger supply chain.
For most SMEs the challenge is not capability. It is visibility. Opportunities are spread across several portals and buried in lengthy notices, and finding the right ones early enough to prepare a strong bid takes time that small teams rarely have. That is the gap Supplierverse exists to close, by helping businesses discover relevant public sector tenders faster and focus their effort on the ones they are best placed to win.
If you are new to defence, a practical starting point is to register on the Defence Sourcing Portal, check your readiness on cyber and compliance, and set up alerts for the categories where your products or services fit. Then build a bid library so that you can respond quickly when a suitable notice appears. The market is growing, the policy direction favours smaller suppliers, and the businesses that prepare early will be best placed when the next opportunity arrives.