UK government procurement reforms target British industry and SME access

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UK procurement reforms and SMEs

Highlights

UK government issued guidance leveraging 2023 Procurement Act national security powers to direct award contracts in steel, shipbuilding, energy, and AI to British companies.
New Policy Notice requires government contracts using steel to declare British steel usage or justify alternatives, aiming to boost domestic industries and supply chain resilience.
Procurement reforms include a £7 billion SME spending target by 2028, streamlined processes like 'Tell us Once,' tighter late payment rules, and expanded use of AI tools.

Procurement overhaul focuses on security, steel and smaller suppliers

As reported by GOV.UK, Ward tells D-Group members that ministers have made three major procurement policy moves in recent months, covering national security, insourcing of public services and fairer access for SMEs and VCSEs. He says the government wants procurement to become a lever for growth rather than a barrier, after repeated complaints from businesses and charities that the current system is too complex and too often favors the most polished and lowest bid over innovation or local delivery.

Ward says the government has issued guidance to departments on using national security powers in the 2023 Procurement Act to direct award certain contracts to British companies where appropriate and lawful. He says the approach initially applies to four sectors seen as critical to national security, steel, shipbuilding, energy and AI.

He also announces a new Policy Notice requiring future government contracts using steel to confirm whether British steel is being used, or explain why it is not. Ward says the change is designed to channel more contracts toward domestic core industries and strengthen supply chain resilience.

On access for smaller bidders, he says ministers are reviewing the procurement process from end to end to remove unnecessary burdens and duplication. Planned changes include a "Tell us Once Principle" for bidder information, greater use of AI tools to generate and quality assure commercial documents, tighter late payment rules and a target for the government to spend more than £7 billion through direct procurement to SMEs by 2028.

Public service insourcing and wider economic effects

Ward says the reforms are also meant to build what he describes as a fairer economy, including a stronger definition of social value developed with businesses, unions and voluntary groups. He says the revised framework is intended to put local communities more clearly at the center of procurement decisions and better align contract awards with programs such as the Youth Guarantee and apprenticeship reforms.

Alongside that effort, he says the government is pushing ahead with a broader insourcing agenda after what he describes as decades of outsourcing by default. A new Public Interest Test now requires departments to publish insourcing strategies and publicly justify future decisions to outsource services.

Ward adds that the government intends to bring security and cleaning services covering No. 10, No. 11, the Cabinet Office and 83 buildings around the country back in-house. He presents that move as an early step in a longer-term effort to shift public service delivery away from external contractors while using procurement policy to support domestic capacity, local economies and employment.

Our earlier report on UK political pressure on pension funds explained how ministers want more retirement savings directed into domestic investment, and have signaled they could move from voluntary targets to compulsion. We noted that while this could improve UK funding conditions, it also raises concerns about pension fund independence and fiduciary duties.

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