Much talk surrounds the increased use of small and medium enterprises (SMEs) across the UK defence supply chain, and for very good reason as there are many advantages to employing the skills, knowledge and culture that SMEs can bring to military procurement. In this blog, we look at how SMEs can bring much-needed benefits to the defence sector and why their inclusion should be encouraged further.
SMEs play an integral role in the defence supply chain, providing resilience and a strong industrial base, both of which are critical for national security and economic prosperity.
In recent years, the UK Ministry of Defence (MoD) has communicated its desire to increase the amount of defence spending with SMEs and further improve their access to opportunities[1]. This has resulted in the SME Action Plan, the most recent of which was released in 2022 and covers the government’s approach to the use of SMEs for military acquisitions out to 2025.
This identifies that there are advantages to diversifying the MoD’s supply chain to ensure that innovative technologies can be exploited by the military, but also that work needs to be done to improve opportunities and remove barriers to entry for SMEs.
“We want to create a vibrant, competitive and sustainable supply chain where innovation, agility, value for money and the customer focus delivered by SMEs contributes fully to providing our armed forces with the very best science and technology,” the plan says.
“We also recognise that the contribution made by SMEs is more important than ever to UK national prosperity and our ability to continue to compete in the global marketplace.”
The MoD has also set up the Defence Suppliers Forum (DSF) with a specific SME Working Group, once again underlining the importance of SMEs.
GRiD, as a British SME, can attest that there are benefits to using smaller enterprises, both directly and indirectly, and we discuss some of these below.
[1] Defence and Security Industrial Strategy 2021 – https://assets.publishing.service.gov.uk/media/60590e988fa8f545d879f0aa/Defence_and_Security_Industrial_Strategy_-_FINAL.pdf
1. Made in Britain
Not only is best-in-class technology high on the agenda for the MoD, wherever possible capabilities and suppliers have to be selected with the UK’s wider prosperity agenda in mind. Social value in particular has generated greater interest from the government in recent years, with contract bids having to prove they have additional positive impacts for the UK, including social, economic or environmental.
“Social value showcases the powerful contributions that government contracts and the industry supplying them can make for society,” wrote DE&S’s Director General Commercial, Andrew Forzani.
As well as its SME Working Group, the DSF also has a Social Value Working Group, highlighting its importance for the MoD and industry.
By leveraging technologies and solutions that are manufactured by SMEs in the UK, it is more likely that the MoD will find success in its social value initiatives. This is because UK SMEs are already contributing to regional economies and are key members of local communities, which may be lacking when a firm is not already established in Britain.
Moreover, selecting British capabilities will directly benefit UK prosperity, increasing the number of skilled jobs available, strengthening sovereignty, and contributing to GDP.
UK manufacturing has seen a decline in recent decades, but there is potential and hope that this can be turned around and the country can once again be the engineering powerhouse that it once was.
Read more: What does it mean to be “Made in Britain”?
In order to do this and keep know how and engineering skillsets in the UK, the whole supply chain must be factored in, including SMEs that will significantly contribute to the success of this endeavour.
GRiD is a British company that develops all of its solutions onshore, something that truly sets us apart from our competitors. This means that we are helping strengthen the engineering output of the UK industrial base, utilising British suppliers and exporting to allied nations worldwide, thus bolstering our contribution to the UK economy.
2. Skillsets
The appeal of working within the defence industry means that it historically manages to retain talent for years or even decades. As a result, there is a fountain of knowledge within the workforce, but as employees retire, there is a risk of this being lost.
This needs to be considered by both government and industry, and education and training is a key component of ensuring that those skillsets are spread across not just one company’s workforce, but also the whole supply chain.
By diversifying defence spending to include a mix of academia, SMEs and primes, knowledge is shared and there is less risk of it being lost as workforces change.
Smaller enterprises can provide great opportunities for graduates or apprentices that want to enter into a career in this industry, and these companies are often agile in their approach to onboarding new talent.
SMEs are also adept at sharing knowledge with partners, ensuring that the best technologies end up in the hands of the user.
3. Speed
Programmes within defence are often enduring, multi-year projects, but there is a communicated desire from government for a more dynamic approach to be adopted across defence in the UK.
In February 2024 the UK MoD released its Integrated Procurement Model: driving pace in the delivery of military capability policy paper, which outlined the government’s desire for defence acquisitions to be able to keep pace with emerging threats.
“In today’s rapidly changing threat environment, we must be faster and more agile, else we risk losing strategic advantage,” the paper says.
“It has therefore never been more important that our acquisition system is able to respond rapidly and adapt to changing circumstances.”
The paper refers to moving towards a more joined up approach across defence to break down stovepipes, initiatives to challenge assumptions and ensure more informed decision-making from the offset, prioritising exports to bolster the UK’s industrial position, empowering industrial innovation, and making spiral developments the standard.
SMEs by their very nature are faster, more agile and can adapt to emerging requirements, and they lend themselves to the initiatives outlined in the integrated procurement model paper.
4. Local suppliers
SMEs tend to work alongside other smaller suppliers because they do not necessarily have all capabilities in house. This further diversifies the supply chain, meaning that the customer gets the best possible solutions and the industrial base in country is strengthened.
GRiD uses many trusted suppliers and partners, and moreover it tries to use suppliers that are located within a 50 mile radius of its headquarters.
This provides additional control over the development of parts and systems, and means that regular contact can be made with them so that problems can be rectified as soon as they occur.
This brings advantages for the overall development of a system, reduces risk, and increases efficiencies. And it means that our efforts to build resilience into our supply chain has a positive knock-on impact on the wider MoD effort to strengthen industrial resilience.
5. Benefits of directness
The mix of suppliers across the UK supply chain is what makes it so well positioned to deliver best-in-class capabilities for the UK customer and its export partners, and each one has its place and specialist skillset.
That said, it is not always necessary for the entire supply chain to be included in all MoD purchases, and opting for the most appropriate acquisition approach depending on the solution being bought will increase efficiencies and allow systems to rapidly enter into service.
Sometimes there are advantages to purchasing directly from an SME, for example, rather than doing so via a larger company or a prime. If these other suppliers are not needed and do not add any value to the acquisition, then purchasing directly can reduce speed, cost, and time.
At GRiD we have strong relationships with all of the prime contractors we work with, and relish the involvement we have on truly innovative, integrated capabilities.
And that is where primes more often than not bring the most value – as an integrator. They are skilled at taking all of the various subsystems and integrating them into a complex capability that truly meets the customer’s requirement. But sometimes there are siloed needs that can be bought directly that speed up the delivery and reduce costs.
GRiD is prepared and willing to work in both ways, ultimately delivering best-in-class systems to the end user that provides them with an operational advantage at the best value possible.
Drop an email to sales@griduk.com if you want to learn more.
