Recommendation 66

Only a small proportion of MOD spending with SMEs goes to Scottish SMEs, however. During our previous defence inquiry into Scotland’s military landscape, the MOD told us that Scottish SMEs accounted for just over £25 million of the MOD’s total spend. This is around 2.5 per cent of the approximate £1 billion total spent with SMEs in 2020/21. Scottish SMEs account for 6.2 per cent of all UK SMEs.105 When we put this to the Defence Secretary he accepted that the 2.5 per cent figure sounded “rather low.”106 Our previous report on the military landscape in Scotland noted that 2.5 per cent is far below the UK average for a region, and below Scotland’s population share of the UK. Witnesses we spoke to during that inquiry suggested this was because the MOD was culturally disposed towards working with contractors in the south of England with whom it had existing relationships and was slow to change. This led us to conclude that there was an “engrained hesitancy within the defence sector towards working with Scottish SMEs.”107 The UK Government in its response said it “reject[ed] the Committee’s view.”108