Jul 28
The government’s new SME Action Plans give central departments individual targets for direct procurement spending with small and medium-sized enterprises. The published ambition is for more than £7.4 billion a year to flow directly to SMEs by 2028, with departments reporting progress annually.
The Cabinet Office is targeting 30% of its procurement expenditure with SMEs by the end of 2027/28. The Department for Science, Innovation and Technology has set a 40% target for 2025 to 2028, although specified major programmes are excluded. These targets improve visibility, but they do not guarantee contracts or create an automatic preference for SMEs. Businesses must still satisfy the tender requirements and demonstrate value.
The public sector spends around £300 billion a year procuring goods, works and services. Our guide to how a tax accountant supports small businesses can help you prepare the financial foundations before bidding.
The Procurement Act 2023 took effect on 24 February 2025. It introduced more standardised notices, clearer feedback requirements, a flexible competitive procedure and an enhanced Find a Tender service.
| Feature | What it means for an SME |
|---|---|
| Departmental SME targets | Central departments set direct-spend targets and publish progress |
| £7.4 billion annual ambition by 2028 | More direct government spending is expected to reach SMEs |
| 30-day payment terms | Valid, undisputed invoices are generally subject to 30-day terms under covered contracts and supply chains |
| Central Digital Platform | Store core supplier details once and reuse them in public-contract bids |
| Below-threshold identifiers | From 1 April 2026, suppliers awarded certain smaller contracts must provide a registered identifier |
The Act generally implies 30-day payment terms in public contracts and requires equivalent terms to pass through qualifying subcontracts. The protection applies to valid and undisputed invoices. It strengthens suppliers’ position but does not remove the need to monitor invoices and manage cash flow.
This matters for smaller suppliers affected by the late payment culture. Contracting authorities must also publish payment-compliance information, improving transparency around payment performance.
Public bodies award contracts to the most advantageous tender using disclosed criteria. Price may be important, but quality and relevant social, economic or environmental outcomes can also be assessed. Criteria must relate to the contract and be clear, measurable and proportionate.
| Award factor | Evidence that may strengthen a bid |
|---|---|
| Quality and delivery | Case studies, accreditations, staffing and a clear method |
| Social value | Measurable local employment, skills or community outcomes |
| Environmental performance | Reliable data and a proportionate improvement plan |
| Price | A sustainable, fully costed offer |
Review ESG reporting for SMEs and collecting ESG data before you are asked before making environmental claims. Maintain forensic-grade evidence for figures that could be scrutinised.
The Procurement Act applies mainly in England, Wales and Northern Ireland, while Scotland retains separate procurement legislation. The Republic of Ireland follows its own EU-based framework. Our cross-border accounting and tax team can support businesses operating across both jurisdictions. If a lost contract or delayed payment affects liquidity, early recovery and restructuring advice may protect your options.
An SME generally has fewer than 250 staff and turnover of no more than £44 million or a balance-sheet total of no more than £38 million. Register early and prepare before a suitable tender appears. The SME business solutions team at SCC Chartered Accountants can help make your accounts, forecasts and supporting information bid-ready.
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