Review Discussion on Budget: Insight from Simply Business
The UK government's Spending Review 2025 is set to empower small and medium-sized enterprises (SMEs) through a series of targeted initiatives, focusing on technology investment, funding, and training/apprenticeships. These measures aim to improve access to government contracts, provide dedicated investment in digital and AI technologies, speed up payments, bolster research and development (R&D), and promote skills and entrepreneurship—key pillars to bolster SME growth and innovation in the UK economy.
One of the key aspects of the Spending Review is the investment in technology and AI adoption. The government has committed £2 billion to the AI Opportunities Action Plan, a campaign to help businesses adopt AI technologies. This includes support for businesses and young entrepreneurs to engage with AI and the establishment of AI growth zones across the UK, which provide extra support through simpler planning and increased private investment.
The Spending Review also includes increased investment in R&D, supporting SMEs to innovate and adopt new technologies linked to AI and net-zero targets.
Under the Procurement Act 2023 and recent Cabinet Office directives, large contracting authorities (those spending £100m+ annually) must set and report on three-year spending targets with SMEs and voluntary, community, and social enterprises (VCSEs). Suppliers who do not pay their supply chains promptly can be barred from large contracts, which encourages timely payments benefiting SME suppliers. Rules enforce a 30-day payment timeline throughout the supply chain, addressing delays that particularly impact SMEs.
The government has announced a 50% increase in Ministry of Defence (MOD) spending with SMEs to £7.5 billion per year by 2028, aiming to give small firms better access to defence procurement opportunities, including through a newly launched SME hub.
In terms of training and apprenticeships, the government has committed £1.2 billion for programmes aimed at providing access to motivated young individuals for small businesses. The government's commitment to training and apprenticeships represents a significant investment in the partnership between youth ambition and business growth.
While direct references to specific training and apprenticeship programmes are limited, the overall focus on support for young entrepreneurs in tech adoption and the government’s industrial strategy imply backing for skills development alongside funding and procurement reforms.
The Spending Review offers hope for SMEs with practical actions for growth. The British Business Bank's finance capacity is increased to £25.6 billion to help entrepreneurs grow. The government's decision to expand training opportunities is seen as an important step in supporting small businesses, particularly in addressing the skills gaps faced by them.
However, a survey commissioned by Allianz Commercial found that a growing proportion of small businesses do not have any insurance. This highlights the need for SMEs to review their cover needs when their circumstances change.
The UK government recognises small businesses as partners in rebuilding the economy. The government's announcement aims to serve young people seeking to start their own businesses and gain economic independence. The UK's future prosperity depends on the strength of its entrepreneurial backbone, and these measures are a significant step towards nurturing this vital sector.
- The UK government's Spending Review 2025 not only focuses on bolstering SME growth and innovation in the UK economy through various measures, but also has committed £2 billion to the AI Opportunities Action Plan, aiming to support businesses, including finance for technology investment and AI adoption.
- In addition to supporting SMEs in technology and AI, the Spending Review comprises of a 50% increase in Ministry of Defence spending with SMEs, providing better access to defense procurement opportunities and an investment of £1.2 billion for training and apprenticeship programs, which are pivotal to addressing skills gaps faced by SMEs.
