Defence Procurement: Small and Medium-sized Enterprises

Luke Myer Excerpts

Tuesday 28th January 2025 Westminster Hall

[Luke Myer (Middlesbrough South and East Cleveland) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate my hon. Friend the Member for Newton Aycliffe and Spennymoor (Alan Strickland) on securing this important debate. He spoke about the importance of defence procurement for our region in particular, and our potential for strengthening our national economy and national security.

As my hon. Friend the Member for Stockton North (Chris McDonald) says, for decades, Teesside has helped to build and power our economy, and the steel forged in our furnaces became the bones of bridges, railways, and skyscrapers around the world. We once built the world, and today we stand ready to defend it. In addition to the examples that we have heard of Teesside innovators working at the cutting edge, I will give an example from my constituency—that of Tees Components.

Tees Components provides the precision machining required to service the state-of-the-art equipment that our Navy relies on, such as the bow thrusters used on Astute-class submarines. Such manufacturers play an integral role in developing local skills through high-level skills training and apprenticeships, and in delivering good-quality jobs in an area that really needs them, but where talent and tenacity are never in short supply. Too often, however, such companies—with world-leading innovation and a proven track record—are left to struggle for a seat at the table. It is clear to me, and to other Members, that there is much more to do to open up procurement for SMEs.

I agree with my hon. Friend the Member for Newton Aycliffe and Spennymoor on the need to improve engagement with SMEs. The Federation of Small Businesses has long called for a centrally managed body to oversee MOD contracts; I wonder whether the new strategic leadership of the national armaments director, as promised by the Government, can help to disaggregate some of those contracts and deliver the changes that are required.

Currently, only 4% of direct MOD expenditure goes to SMEs, and indirect involvement in the supply chain often proves unsustainable. Although large multinationals typically receive payments within five days, SMEs often face late payments, as we have heard. One solution could be specifically earmarking a portion of the prime contractor bid funding to support SME participation. That could include measures to mitigate financial risk, such as up-front payments.

I believe that the new Labour Government understand the challenges that we face. We have already heard some of the measures being taken to reform defence procurement and make it work for Britain. I am proud that the Government have identified defence as a growth-driving sector in our industrial strategy and I welcome the work under way in the SDR and in the defence industrial strategy to ensure that British business is prioritised in procurement.

This debate is about ensuring that we invest in defence, but it is also about ensuring that we invest in our communities—our workers, engineers and innovators who want a chance to contribute to Britain’s success. It is about remembering that national security does not begin and end on the battlefront, but in the workshops and design labs of Skelton or Sedgefield.