Defence Procurement: SMEs

The Government’s modern industrial strategy, launched last week, announced a 50% increase in MOD spending with small and medium-sized enterprises to £7.5 billion a year by 2028, reversing the downward trend under the previous Government. Our new SME hub will help small firms to access better opportunities, and our reform of defence procurement, along with ringfenced innovation funds, will give SMEs access to the defence dividend. This Government’s increase in defence spending will provide jobs and growth across the UK.

Basingstoke is home to some fantastic defence SMEs, including Nightball Technologies and Bertin Exensor, but one issue that has been raised with me is that Government procurement agencies cannot specify UK sovereign tech or sole-source contracts, even where UK capabilities exist. That results in lengthy competitive tenders, where there is a high risk that end users do not get the capabilities that they need and equipment is bought from foreign suppliers. Will the Minister meet with me and firms from Basingstoke to discuss how we can prioritise UK defence SMEs over foreign suppliers, especially where UK sovereign tech exists?

My hon. Friend makes an interesting point. There is some flexibility under our procurement rules to specify national security grounds upon which to make a decision. Half our spend is already through sole-source contracts. I am of course happy to meet him and his SMEs. We are delivering for defence by promoting new procurement models that are easier for small firms to access, and our SME hub will engage directly with SMEs to help them to access defence supply chains.

In my constituency of North Somerset, many small and medium-sized enterprises are springing up to support our country’s rearmament efforts. In Nailsea, one such company, 1415 Industries, was recently blocked from opening a business bank account due to blanket prohibitions and excessive delays by retail banks, hindering its ability to organise seed funding and bid for procurement contracts. Will the Minister meet with me to discuss the case of 1415 Industries and the wider problem relating to financial institutions and their interactions with defence SMEs that the case highlights?

I recognise my hon. Friend’s point, and I will of course meet with him and his SMEs. Over the last six months, the Defence Secretary and I have convened stakeholders from industry and finance to discuss this issue and make it clear that defence is an ethical sector that they should support. The strategic defence review committed us to developing a dedicated financial services sector strategy, which we will aim to publish in spring 2026. That should give us a further opportunity to make sure that the finance industries know what a good investment defence can be.

Our UK defence industry can have few better ambassadors around the world than our Red Arrows. As the Hawk aircraft comes to an end, will the Minister look closely at the British-designed modular aircraft being developed by Aeralis, because it would support SMEs right across our country, including by bringing around 600 jobs to StandardAero in Gosport and about 1,000 to the south Hampshire area? Surely that would be a much better way to support our national SMEs than opting for the Italian-Russian Yak-130 aircraft, which the MOD is rumoured to prefer.

I know Aeralis well; I visited it when I was in opposition, as I know the hon. Member for South Suffolk (James Cartlidge) has done, and I have spoken to its representatives since. Of course, an open competition will be held for the new aircraft to deliver advanced jet training and for an aircraft for the RAF aerobatics team, to ensure value for money and positive UK benefit, and I hope that Aeralis will apply for that competition. It will have a very good chance if its product is up to scratch.

I thank the Minister for her answers. She is a regular visitor to Northern Ireland and supports the SMEs there, so when it comes to the defence industrial strategy to support SMEs, could she update the House, and myself in particular, on what she and the Government are doing to help SMEs in Northern Ireland to increase jobs and also increase contracts?

The hon. Gentleman is right to say that I have visited Northern Ireland and its defence sector on a number of occasions, and I hope to return and do so again. The increase in spend that was announced last Monday on the modern industrial strategy for our SMEs to take advantage of—an increase of 50% up to £7.5 billion a year—should give opportunities for some of the innovative companies in Northern Ireland to take advantage of the available money. When our SME hub gets up and running, it will be available to assist small firms in understanding how best to get access to some of the opportunities that that will bring.