Procurement Spend with SMEs Hits Six-Year High 

•  SME share of public procurement hit a six year high in 2025, at 21% of all direct spend (£45.2bn) 
• Central government was significantly behind its new SME procurement spending targets last year, averaging 8.4 percentage points below the required levels.   
• Local government continues to be the part of the public sector spending the most with SMEs, £29.1bn in 2025.  
• Local government has seen sustained year-on-year growth in SME spending since 2020, while central government has fallen. 
• Procurement varies sharply by sector, with SMEs receiving 33% of direct spending in education, training and recruitment – but only 3% in defence and aerospace.  

Direct public sector procurement spend with SMEs hit a six year high of 21% last year, according to the latest report by the British Chambers of Commerce (BCC) and public procurement intelligence provider Tussell.  

The BCC and Tussell’s SME Procurement Tracker – now in its fourth year – is the market’s definitive benchmark of direct government spending small and medium sized businesses across England. 

The report, which gives the first indication of the impact of the Procurement Act, reveals absolute public spending directly with SMEs was £45.2b in 2025. That compares to £43.9b in 2024, and £32.3b back in 2020. As proportion of spend, SMEs now account for 21% of overall direct spend, up from 19% in 2024. It has also bucked the running average of 18% since 2020. 

Local government in England continues to be the SME spending success story. In 2025, local authorities had the highest share of spend (34%) and the highest absolute spend with SMEs (£29.1b). In comparison, the NHS share of SME spend was 16% last year, broadly flatline since 2020. Meanwhile, central government’s share in 2025 was 10% (£6.4b) below where it was in 2020 at 13%.  

The data also shows that central government has a long way to hit new SME spending targets. The BCC and Tussell findings show that on average, departments are 8.4 percentage points below target. The Department for Education is performing the best, spending 10% above target, while the Department for Science, Innovation and Technology spend with SMEs in 2025 was 28% below target. (-28%).

Public sector procurement spend with small and medium sized firms varies across different sectors. 33% of spend in education, training and recruitment sector was with SMEs – while the spend in defence and aerospace was just 3%.  

Jonny Haseldine, Head of Corporate Governance and Business Environment Policy at the British Chambers of Commerce said: 

“SMEs reaped the benefits of the Procurement Act last year, with public sector spend hitting an all-time high.  

“That was good news for firms across England wanting to have their slice of the procurement pie. More businesses are now benefiting from crucial government contracts.  

“However, peel back the headline and there are still real areas of concern. While local government continues to lead by example, central government spend has fallen back since 2020, with many departments now struggling to get anywhere near their own targets. 

“Procurement spend can be a lifeline for SMEs currently navigating choppy waters. The BCC’s Great British Supply Chain project is working to source, build and deliver infrastructure projects, building on the Chamber involvement in projects such as Hinkley Point C and Sizewell C.  

“It’s crucial that every part of the public sector accelerates its commitment to supporting our amazing small and medium sized businesses.” 

Gus Tugendhat, Founder of Tussell said:  

“For the fourth year running, we are proud to hold government accountable for its SME procurement ambitions. 
 
“This year, direct public sector spend with SMEs reached a record 21% - equivalent to £45 billion spent with small businesses in 2025. However, most of this progress was driven by Local Government, which directed more than a third of procurement spend to SMEs. By comparison, Central Government and the NHS remained flat at 16% and 10% respectively. 
 
“We welcome the introduction of new three-year ministerial targets for SME spending, many of which are ambitious. Our research shows that reducing average tender values, as Local Government has done, is one of the most effective ways to increase SME participation. Government must also be willing to back smaller suppliers, rather than continuing to rely on incumbent prime contractors. 
 
“Tussell will continue to track performance against these targets and assess whether they lead to meaningful progress.”