New opportunities for small businesses to access more public sector contracts

New opportunities for growth have opened up for small business owners now that the long-awaited Procurement Act 2023 has become law.

After a delay following the change of Government in 2024, the Procurement Act 2023 finally came into force on Monday 24th February 2025.

The transformation of the procurement process promises to make accessing public sector contracts easier and fairer for small and medium-sized businesses.

With £400 billion¹ spent on public sector contracts every year, opening up access to smaller businesses represents a significant opportunity for growth for this sector.

Here we explain what the Procurement Act 2023 is, how it could help your small business access new revenue, and how you can take advantage of this opportunity.

What is the Procurement Act 2023?

The  Procurement Act 2023 is a change to the rules that govern how public bodies buy goods and services. 

New legislation that simplifies and streamlines the procurement process has been designed to help small and medium-sized businesses win a greater share of the £400 billion spent annually on public sector contracts. 

How will the Procurement Act 2023 help small businesses?

In a bid to open up public procurement to new entrants, such as small businesses, the new Act is more flexible and offers greater transparency than previous regulations. 

Key changes that will benefit small businesses include:

• Easier to navigate the process and apply – The central digital platform, Find a Tender, has been updated to make it simpler for small businesses to register and use. Small businesses can store their details and see all previous bids, so they can make multiple bids quicker and easier. 

• Simplified bidding process – One clear set of rules replaces multiple regulations.

• Reduced bureaucracy so small businesses can compete for more contracts. For example, small businesses now no longer need to comply with insurance and accounting requirements before they bid.

• Clampdown on late payments with 30-day payment terms on a broader range of public sector contracts.

• Fairer access to contracts through Find A Tender, where all public procurement opportunities will be displayed in one place and visible to all. Users can set up alerts for suitable tenders so they never miss an opportunity, ensuring the system is fairer to businesses of all sizes. 

• Greater transparency – Feedback is now required on all tenders, which will help small businesses improve future bids, and allow the public to see how taxpayers money has been spent.

• Big contracts opened up – Contracts can now be broken up into smaller, more niche lots, giving small businesses more opportunity to bid.

• Helping SMEs compete on more than just price – The basis on which contracts are awarded is now through a ‘most advantageous tenders’ approach, rather than the previous ‘most economically advantageous tenders’ approach. This allows contracting authorities to take wider factors, such as social responsibility and sustainability, into account when choosing suppliers.

• More opportunities – The Government’s National Procurement Policy Statement sets out the expectation that the public sector maximises spend with small and medium-sized enterprises, with three-year targets published and reviewed annually.

How can my small business take advantage of this opportunity?

To help small businesses better understand and access the new opportunities available to them, the Government has provided a host of information, including regular updates, Knowledge Drop videos, and deeper dive training material. Find out what you can do to act now here.  

If finance will help you access more public sector contracts, find out what options are available to you here. 

13/03/25: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice. 

¹National Procurement Policy Statement – 13th February 2025