The government has just made SME procurement a much bigger public story.
On 24 March 2026, the Cabinet Office announced that central government departments have, for the first time, set individual spending targets for small and medium-sized enterprises, with the aim of delivering more than £7.4 billion a year to small businesses by 2028. That is a Whitehall announcement, but local authorities should not dismiss it as someone else’s agenda.
For councils, this is the sort of national procurement news that quickly turns into a local expectation. Once government starts publishing hard targets, annual progress updates and department-by-department comparisons, the obvious next question is whether other public bodies can show that they are also opening the door to SMEs and VCSEs.
That is why this matters now. Even where councils are not under the same target-setting regime as central government departments, they are still operating in a policy environment that expects smaller suppliers to get a fair chance at public contracts.
Why this is bigger than a Whitehall story
At first glance, this may look like a central government issue.
The new announcement is about departmental targets, and the published table includes bodies such as the Department for Science, Innovation and Technology, the Department for Education and the Ministry of Housing, Communities and Local Government. But the underlying message is much wider. Government is signalling, very publicly, that SME access to public contracts is not a side issue. It is now part of the growth agenda.
That matters for local authorities because councils already sit within a procurement framework that points in the same direction. The National Procurement Policy Statement says contracting authorities should maximise procurement spend with SMEs and VCSEs, while the Procurement Act 2023 introduced measures intended to reduce barriers to entry, improve visibility of opportunities and support earlier engagement with suppliers.
So although councils may not be handed a Whitehall-style quota tomorrow morning, the direction of travel is unmistakable. The market, members, scrutiny bodies and local businesses are all more likely to ask the same question: what is your authority doing to make procurement more accessible to smaller suppliers?
Why this could become a high-interest issue for councils
This is the kind of story that can travel quickly because it connects several things councils already care about.
It links to local growth.
It links to town centres and high streets.
It links to social value, local jobs and supply chain resilience.
It links to complaints that public procurement still feels too complex, too slow or too tilted towards larger incumbents.
And it links to a practical concern for elected members, which is whether the council can show that public spending is helping build local economic capacity rather than simply flowing out of the area.
For procurement teams, this creates both an opportunity and a risk.
The opportunity is to show that good commercial practice can support local economic outcomes without abandoning fairness or value for money.
The risk is that councils say they support SMEs in principle, but cannot show where barriers still exist in their own process.
The real question for councils is not “do we like SMEs?”
No authority is going to answer that question with “no”.
The real question is whether current procurement practice actually gives smaller suppliers a realistic route in.
That is where this story becomes operational.
A council may publicly support SMEs and VCSEs, but still use contract packaging that is too large for most local providers.
It may still use turnover, experience or insurance expectations that are technically familiar but commercially disproportionate.
It may still issue procurement documents that assume a level of bid resource many smaller organisations simply do not have.
It may still publish too little forward visibility for suppliers to prepare properly.
It may still pay too slowly, or fail to manage prompt payment discipline through the supply chain.
In other words, the barrier is often not one big rule. It is the accumulation of smaller habits.
That is why the Cabinet Office announcement matters beyond Whitehall. It puts fresh pressure on all public bodies to look at the practical experience of smaller suppliers, not just their published intentions.
What councils should review now
The first thing councils should review is their evidence base.
Do you know what share of your spend goes directly to SMEs and VCSEs?
Do you track it reliably enough to answer member, auditor or scrutiny questions with confidence?
If the answer is no, that is now a governance gap, not just a data gap.
The second issue is pipeline visibility. Smaller suppliers are more likely to engage where they can see opportunities coming with enough time to prepare. If pipeline planning is weak, local markets remain on the back foot.
The third issue is procurement design. Councils should review whether contracts are being structured in a way that unnecessarily excludes smaller organisations. Lotting strategy, bid timescales, proportionate conditions, simpler documentation and better early market engagement all matter here.
The fourth issue is below-threshold purchasing. Many local suppliers will never see themselves as realistic bidders for major strategic contracts, but they may be highly capable in lower value markets. Authorities should therefore look carefully at how routine below-threshold buying is being run, how opportunities are advertised, and whether the authority is making sensible use of the flexibilities now available under the new regime.
The fifth issue is payment. Smaller suppliers notice quickly whether a public body talks about inclusion but pays slowly, or tolerates poor payment behaviour down the supply chain. This is now even more visible under the Procurement Act reporting framework.
This is not a call for tokenism
Councils should also be careful not to respond to this news in the wrong way.
This is not about arbitrary quotas, performative localism or awarding contracts to weaker bids for symbolic reasons. It is not a reason to abandon fair competition. It is not a shortcut around governance.
The stronger response is more disciplined than that.
It is to ask whether current commercial practice is proportionate, evidence-based and genuinely open to capable smaller providers.
That approach is far more defensible, and far more likely to improve competition, resilience and value over time.
In many categories, a healthier SME and VCSE market can mean more innovation, better local knowledge and less dependence on a narrow field of large suppliers. But that only happens where councils remove avoidable barriers without compromising standards.
What this could mean over the next year
The Cabinet Office announcement may be central government in form, but it is likely to raise the temperature across the wider public sector.
Once departmental targets and annual updates are public, the comparison culture begins. Questions about SME access, local growth and supply chain diversity become easier to ask and harder to avoid.
For councils, that means this story may quickly move from national news into local scrutiny.
Procurement teams that act now can get ahead of that by reviewing spend visibility, barriers to entry, procurement design and payment discipline before the questions become louder.
The main takeaway
The government’s new SME spending targets are not just a Whitehall headline. They are a clear signal about where public procurement is being pushed next.
For local authorities, the practical message is simple. You may not have been given the same target system, but you should expect greater pressure to show that smaller suppliers and VCSEs can access your opportunities fairly, proportionately and in a way that supports local growth.
Councils that can evidence that will be in a much stronger position. Councils that cannot may find this national announcement becomes a very local procurement question much sooner than expected.