Government SME spending targets: what they mean for small firms bidding in 2027

Government departments now have SME spending targets, and the Budget added new rules on jobs and skills. Here's what that means for your next bid.

Alyssa Polidoro · 2 November 2026 · 4 min read

Government departments now have targets for how much they spend with small and medium-sized businesses (SMEs: firms with fewer than 250 staff and either turnover of £44 million or less, or a balance sheet total of £38 million or less). From 1 January 2027, bids for central government contracts worth more than £1 million will also be scored partly on jobs and skills. If you employ people locally or train apprentices, that could help you, as long as you can show it in your bid.

I've worked on the buying side of tenders, and the same thing comes up again and again. Good firms miss out because they find the notice late, or read the requirements last. This post covers what has been announced and how to get ready.

What are the SME targets?

In March 2026, government departments published their first targets for spending with SMEs. The Cabinet Office says they add up to more than £7.4 billion a year by 2027-28. The Ministry of Defence has its own separate target.

The targets differ a lot between departments:

Department for Science, Innovation and Technology: 40% over three years
Department for Culture, Media and Sport: 33%
Cabinet Office: 30%
Nearly half of all departments are aiming above 20%

Each department has to publish its progress every year. Any that fall short have to publish a plan to improve. (Source: Civil Service World.)

These targets apply to central government departments and their agencies. NHS trusts aren't covered, and councils can choose whether to follow them.

What did the Budget add?

The Budget on 28 October 2026 added more on public buying. These are the points that matter most to a small firm:

Jobs and skills in bids. From 1 January 2027, bids for central government contracts worth more than £1 million will be scored partly on commitments to good-quality jobs and local skills. This sits under social value (the extra benefit a contract brings to the local area, such as jobs and training).
A new meaning of "UK supplier". The government says it will publish this by January 2027. It says loose definitions have let firms with "little more than a UK post box" count as UK firms.
A new national procurement policy statement. This document tells public buyers what to prioritise. The government says a new one will be laid in Parliament in March 2027, with a focus on good jobs, fair pay and skills.
Apprentices on big projects. Large government infrastructure and construction projects are expected to have apprentices making up at least 3% of the workforce.
Simpler bids. The government accepted 14 of the 15 recommendations from the Small Business Regulation Taskforce, including simpler bids for small firms. No date has been given.

Will this mean more contracts for me?

It should mean more buyers looking at smaller suppliers, but it guarantees nothing. A target gives a department a reason to look at smaller firms. You still have to find the right notice, check you qualify and write the bid.

For example, imagine a three-person cleaning firm that spends two weeks on a council bid. The night before the deadline, someone reads the TUPE section properly. (TUPE: rules that can move the current contractor's staff over to you on their existing terms.) Eight staff would transfer, and none of that was in the price. The firm did nothing wrong, but it found out too late.

How to get ready

Pick your buyers. Work out which departments and councils buy what you sell, and keep an eye on what they publish.
Check the minimum requirements first. Look at the insurance level, turnover and accreditations before you write a word. If you can't meet them, move on.
Gather your evidence now. Policies, insurance certificates, accreditations and case studies are all asked for quickly once a competition opens.
Collect your jobs and skills facts. Write down how many people you employ locally, how many apprentices you have, what training you give and which local suppliers you use. Keep the numbers and dates.
Ask when something looks out of proportion. Insurance levels and start-up timescales can be raised with the buyer in the clarification period (the window when you can ask questions about a tender).
Think about subcontracting. You don't have to hold the contract yourself. You can work for a larger supplier, or join a consortium (a group of firms that bid together).
Check the payment terms. Know when you will be paid, by the buyer and down the supply chain.

What to do next

Read our beginner's guide to tendering if you haven't bid before, and our guide to social value statements to see how jobs and skills answers are scored. If you want contracts you could realistically win first, look at good first contracts.

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Where this comes from

Read our related guide