The Ministry of Defence’s latest SME Action Plan reveals that at least 7000 small and medium-sized enterprises were direct suppliers to the Department in 2013/14 and many more are active within the supply chain.

The updated plan offers a series of priorities for the MOD for SME engagement in 2014/15, including the clarification of the rules and conditions applied by high street banks to lending to companies involved in defence business, so that they can be applied consistently.

The MOD says it values the important contribution SMEs make to defence both as direct suppliers and as participants in the supply chain.

The February 2012 White Paper ‘National security through technology: technology, equipment, and support for UK defence and security’ describes how SMEs are a vital source of innovation and flexibility in meeting defence and security requirements. SMEs can also often offer highly cost-effective vfm solutions for defence requirements.

The White Paper takes into account responses received following the Green Paper on ‘Equipment, support, and technology for UK defence and security’ published in December 2010. The consultation process identified potential for improvements in three main areas: changes to MOD and wider government processes; the way MOD manages its direct relationship with SMEs; and SMEs’ relationships with prime contractors. Plans for improvements in each of these areas may be found in Chapter 5 of the White Paper.

This second issue of the departmental action plan (2013/14) describes further progress MOD has made in the past six months in meeting the actions it has committed to in support of SMEs. This details the work done to support and encourage SMEs and sets a target for increasing MOD’s direct and indirect spend with SMEs by end 2014/15.

Responding to the plan, Paul Everitt, Chief Executive of defence trade organisation ADS Group, said: “The Ministry of Defence’s new SME Action Plan recognises the pivotal role it has to play in achieving the Government’s aspiration to increase public spending with SMEs. The plan identifies the relationship between UK banks and defence SMEs as a key challenge to be addressed, mirroring the experiences of some ADS SME members. ADS has been made aware of cases in which banks are closing the accounts of defence SMEs due to the nature of the sector in which they operate. Banks also appear increasingly unwilling to support letters of credit and export finance to defence SMEs, despite companies receiving export licences from the Government.

“ADS is working closely with the Government to ensure a consistent approach and clarification of the rules and conditions applied by high street banks. This will enable defence SMEs to secure the support from their banks to allow them to deliver contracts for which they have been granted export licences. In doing so, this valuable UK sector will continue its vital contribution to the UK economy, supporting high-value skills and driving innovation and exports.”