On 2 September, Louise Haigh announced the lifting of the defence sector’s exemption from Social Value requirements.
Although defence has not been covered by the Procurement Policy Notes that mandate the Social Value Model across central government, this doesn’t mean the industry ignored Social Value. In fact, in 2021 the Defence and Security Industrial Strategy committed the Ministry of Defence to applying a minimum 10% Social Value weighting in its competitions. More recently, the Defence Industrial Strategy, published in September 2025, built its industrial ambitions around jobs, skills, small business growth and a stronger UK supply chain.
What has been missing is a settled position on how the wider regime applies to defence. Louise Haigh's statement provides the clarification the sector has been waiting for. The exemption is going, and the standard Social Value requirements that apply across central government will now apply to defence contracts too.
PPN 026 sets a minimum weighting of 20% on contracts of £5 million or more (a threshold most defence spending clears comfortably), double the 10% the MOD committed to in 2021. Contracts at that level will also require at least one published Social Value KPI, reported annually, so commitments become a matter of public record.
Given the MOD spent £31.9 billion with UK industry and commerce in 2024/25, supporting an estimated 274,000 full-time equivalent jobs, of which 164,000 were industry roles tied directly to MOD contracts, the scale of delivery affected is considerable.
Social Value and defence policy push in the same direction
The Defence Industrial Strategy frames its procurement ambition as a framework focused on jobs and skills, committing to:
The Strategy also says that industry investment in young people and their future careers in defence will be recognised in the reformed application of Social Value. That was written a year ago, while defence was still technically exempt, which suggests that the department already saw Social Value as a route to its skills ambitions.
Meanwhile, the Defence Investment Plan carries £298 billion over four years, built on three pillars, one of which is ‘Backing British’. Alongside the equipment programmes, it promises nearly 60,000 new jobs against 2023/24 levels. Those are Social Value outcomes in all but name.
It is also clear that defence sees support for small business, which has always been central to Social Value, as a way to strengthen the sector. The SME action plan, published in July and led by the Defence Office for Small Business Growth, reports around £5 billion a year going to SMEs (of which there are around 12,000 in the defence supply chain) with three quarters of that spend arriving through prime supply chains rather than by direct award. One of the plan's four objectives is improving supply chain diversity and resilience by requiring better practices from Defence and its major suppliers. The MOD has also committed a further £2.5 billion by summer 2028.
PPN 026 does not score supply chain spend directly, having narrowed its criteria to jobs and skills. But SMEs account for 60% of private sector employment, and they tend to hire locally, so money reaching smaller firms in defence communities feeds the same labour markets the Model is trying to strengthen.
All of this to say: jobs, skills, and supply chain opportunity are written into defence policy objectives. Social Value makes it possible for buyers to ask bidders to commit to them and score those proposals.
One objection I have heard is that critical defence capability should not turn on who promises the most jobs or skills development. That misses a key fact: defence capability risks being held back by skills shortages.
Skills England's sector assessment for defence puts total demand across the 14 priority occupations identified for defence at 82,000 workers, with 53,000 from growth between 2025 and 2035 and 29,000 to replace people leaving. The largest single age band in the defence workforce is 50 to 59, older than the UK average, and the workforce is 78% male against 52% nationally.
Talent shortages are concentrated in the engineering, nuclear and digital roles that defence programmes depend on, which means they constrain what industry can deliver and how quickly. Fixing those shortages, will make for a more dynamic and capable defence sector.
The defence sector is unusually place-based. In 2024/25 the South East and South West accounted for 78,000 of the 164,000 direct jobs supported by MOD spending with industry. Adjusted for the size of each region's workforce the pattern is sharper still, at 1,640 direct jobs per 100,000 people in employment in the South West against 90 in the North East. With the work tied to physical assets and skilled trades, the benefit is concentrated where the sites are.
Government policy is now trying to widen the sector’s employment footprint. The Defence Industrial Strategy identifies twelve potential high-growth defence clusters and commits £250 million to five Defence Growth Deals in Plymouth, South Yorkshire, Scotland, Wales and Northern Ireland. Defence Technical Excellence Colleges have opened in Blackpool, Plymouth, Lincoln, Rotherham and Yeovil, alongside up to 2,500 new student places on defence-focused courses.
Read together, these are a signal that government sees growing defence capability and improving local labour markets as interrelated projects.
The removal of the defence exemption is a good decision and an overdue one. Defence is becoming an ever more significant source of industrial investment in this country, and there is no good reason it should be held to a looser standard than any other department spending public money.
The sector already holds advantages many industries would envy: concentrated skilled workforces, supplier chains that run deep into local economies, and a physical presence in towns that have grown around this work for generations.
For any organisations bidding for MOD work, the task now is to line up a Social Value strategy with what the Defence Industrial Strategy, the Defence Investment Plan, and the SME action plan are each asking for, and to be able to evidence it under a 20% weighting and a published KPI in line with PPN 026.
If you would like help shaping that approach, get in touch with us at Social Value Portal.