The Door Is Open for Defence SMEs but can the Supply Chain absorb the Demand?
For years, breaking into defence work meant navigating a maze: opaque procurement, onerous terms, and prime contractors as gatekeepers. That is changing. The government is now actively pulling small and medium-sized manufacturers into the defence supply chain — with structures, targets and terms designed to make it easier. The opportunity is real. The question is whether the supplier base is ready to meet it.
The government is actively backing SMEs
The Defence Industrial Strategy commits to lifting annual MOD spend with SMEs from around £5bn to £7.5bn by 2028 — a 50% increase, worth an extra £2.5bn. Crucially, only about a quarter of that value is awarded directly by the MOD; roughly three-quarters flows through Tier 1 contractors, which is the route most specialist manufacturers take into defence programmes.
That split matters: it tells a manufacturer where to look. The fastest route in is often through the primes’ supply chains, not a direct MOD tender.
The barriers are coming down
The bigger change is structural. In January 2026 the MOD stood up the Office for Small Business Growth — a single “front door” with a contact centre, helpline and website — and codified it in a July 2026 SME Action Plan. Alongside it, the practical barriers that used to deter small suppliers are being lowered: SME-tiered liability caps replacing blanket exposure, the single-source reporting threshold raised from £5m to £25m, prompt 30-day payment extended down to sub-contractors, and a genuine single point of contact.
On a qualitative ease-of-access measure, SME access has stepped up from 2.4 out of 5 in 2019 to 4.5 in 2026 — the clearest structural improvement in a decade of policy.
The opportunity gap — room to grow
Here’s the headroom. Direct MOD spend reaching SMEs has historically sat at just 4–5%, well below the central-government average of around 11% and a world away from local government’s 35%. That gap is exactly what the new push is designed to close, across a base of some 12,000 UK defence SMEs.
For a capable manufacturer, under-representation is opportunity but only for those ready to step through the door.
The fastest route in runs through the primes
For most manufacturers, the quickest way into defence isn’t a direct MOD tender it’s the Tier 1 supply chain that carries roughly three-quarters of SME value. That changes where you should focus your energy. Register on the Defence Sourcing Portal, use the Office for Small Business Growth as your single front door, then approach the strategic suppliers the primes building drones, counter-drone and air-defence systems, with a sharp capability statement and the accreditations they screen for. Lead with what de-risks you as a partner: proven cable assemblies and wiring harnesses, box build and integration, and a supply chain built for resilience. The suppliers who win this new work won’t simply be the cheapest they’ll be the ones who can prove quality, traceability and the capacity to scale, which is exactly what primes need to hit their own SME spend targets.
Mobilisation ready and where Cornelius Electronics fits
An invitation only becomes output if the supply chain can deliver. Being “ready to mobilise” means the right accreditations (AS9100D, IPC/WHMA-A-620), the registrations primes screen through and the capacity to move from prototype to volume without compromising quality, plus knowing your stronger negotiating position under the new SME-friendly terms.
That is the work Cornelius Electronics has done for more than 40 years: high-reliability cable assemblies and wiring harnesses, box build and systems integration, test and serial-volume contract manufacturing — turning demand into dependable output from an AS9100D facility in Port Talbot.
Designed by innovators. Industrialised and manufactured in Britain.
If you’re a technology developer, prime or supply-chain partner looking to scale UK manufacturing capacity, we’d welcome the conversation.