SME Reserve

A government policy requiring 33% of central government procurement spend to go to small and medium-sized enterprises, either directly or through supply chains.

How it works

The SME Reserve is a government target mandating that 33% of central government procurement expenditure flows to small and medium-sized enterprises (SMEs). This applies to businesses with fewer than 250 employees and turnover below €50 million or balance sheet totals under €43 million.

The target can be met through direct contracts with SMEs or indirectly through their participation in larger contractors' supply chains. Contracting authorities must actively monitor and report their SME spend, breaking down achievements between direct and indirect procurement.

Why it matters

Introduced to level the playing field for smaller businesses competing against large corporations, the SME Reserve addresses historical barriers that prevented SMEs from accessing public sector opportunities. These barriers included complex tender processes, large contract values, and lengthy procurement timescales.

The policy drives economic benefits by supporting local businesses, encouraging innovation, and promoting competition. SMEs often bring specialised expertise and agility that larger organisations cannot match. The reserve also supports government objectives around social value and regional economic development.

Meeting the target requires strategic procurement planning. Authorities often break large contracts into smaller lots, simplify tender documentation, and implement supplier development programmes. Prime contractors increasingly establish SME engagement strategies to demonstrate supply chain diversity and win public sector contracts.