Government orders that public spending must back British jobs and skills in every postcode

• Government backs industry to create new British jobs and support local communities with new weighting in public contracts.

• Organisations will now be assessed on how they help local people develop new skills and support young people into apprenticeships or work placements.

• Other areas businesses had to prove they were acting on will be scrapped, making it easier for smaller firms to bid for contracts.

Businesses bidding for government contracts - a market worth £90bn per year - will be judged on their commitment to creating high-quality British jobs, tackling local skills shortages, and supporting young people into apprenticeships and work placements.

The Government wants every young person to have the chance to earn or learn. New rules will  double the importance of creating local benefits when the government buys goods or services - ensuring spending directly creates training, work experience, and jobs in every postcode.

Under the changes, the score for bringing benefits to the local community will be raised from 10% to 20% for contracts worth £5m or more, ensuring procurement, whether from UK or international providers, helps support communities.

The changes will also help smaller, scaling and innovative businesses and civil society organisations who have so much to offer the public sector, but often find themselves locked out of contracts because of layers of red tape and burdensome requirements, which larger organisations know how to navigate. The rules have been simplified and the threshold raised to contracts of more than £1 million so they don't typically apply to the work smaller firms and local social enterprises are bidding for. This will better allow both smaller businesses and civil society to showcase their innovation and the benefits they are already delivering in communities. 

First Secretary of State Louise Haigh said:

"Every pound of taxpayer money should be spent in a way that benefits local communities - creating good jobs and giving young people the skills they need for the future.

For too long, securing government contracts has been a tick box exercise that fails to deliver the positive change that people feel in their pocket and see in the places they live.

We are doing things differently. These new rules will ensure the £90 billion that is spent each year through government contracts supports British jobs, skills and people in every postcode.

Bidders can get extra credit for creating local jobs that pay above the legal minimum and treat workers properly, as well as helping to plug local skills gaps by offering training such as 45 days of work experience. These changes will give young people and underrepresented groups a better chance at starting a good career.

Suppliers will be assessed on their commitment to backing British jobs, skills and opportunities,  and specifically targeting support for young people not in education, employment or training (NEETs), care leavers and individuals with long-term health conditions.

To ensure companies honour their pledges, for major contracts, government departments will allocate a key performance indicator and make annual progress reports available publicly. Suppliers' performance will be measured against their commitments.

The announcement builds on the government's commitment to use its £90 billion annual purchasing power as a lever for economic growth, working hand-in-hand with local and mayoral authorities to match contracts to regional priorities. In cash terms, public sector procurement from the private sector has increased by over a third in the last five years, reaching nearly £400 billion in 2024/25.

Cabinet Office Minister Mark Ferguson said:

We believe that if you benefit from something you have a responsibility to give back.

These changes will mean that businesses that benefit from the billions of taxpayer pounds spent by Government, will have to create more local jobs and opportunities for young people in their area.

This is about using every tool we have to help people in every postcode live a better life.

This approach is already being reflected across government, including through the National Cloud Infrastructure Programme (NCIP), which is exploring how government can better coordinate cloud demand across the public sector and work with industry to support long-term digital capability. Through the programme the government is consolidating its buying power, working with industry to help build the digital infrastructure needed for the AI era and create opportunities for young people, including those not in education, employment, or training (NEETs), to develop the digital and AI skills.

Supporting the Prime Minister's ambition to deliver good growth and opportunity in every postcode, NCIP will in turn help bridge the digital divide, boost opportunities, and ensure the benefits of the digital economy are felt across the whole country, not just in the South East.

In line with the principle of devolution by default, local government will lead the way. The Mayor of the West Midlands is leveraging social value to develop a new, preventative approach to supporting additional young people into employment or training in the region. Local leaders will work in partnership with central government and industry on the 3,000 Futures initiative, enabling those who know their communities best to support young people into work and training through harnessing the potential of public procurement. This builds on the region's Youth Guarantee Trailblazer and wider work, testing innovative approaches to tackle youth inactivity in the region. 

The changes come as part of a major package of reforms that will back British jobs and communities by protecting national security, cutting waste and boosting local economies.

This will support our Modern Industrial Strategy to provide the certainty needed to drive long-term investment across the country, including our skills pipeline, and ensure our supply chains are more resilient and that government adopts a stance that supports good risk taking in support  of innovation, rather than stifling it through our procurement processes.

Notes to Editors:

• The new rules will apply to central government procurements, with implementation taking effect from 1 January 2027 following detailed technical guidance in the Autumn.

• Public sector procurement spending rose from £288.7 billion in 2019/20 to £394.8 billion in 2024/25.

Stakeholder reactions:

Craig Beaumont, Executive Director at the Federation of Small Businesses (FSB) said:

FSB is pleased to have worked with the Government on making social value work better for small businesses. Lifting the threshold to £1 million ought to see many more small firms winning contracts, as small businesses deliver huge intrinsic social value but they can often struggle to demonstrate this in procurement processes. This is an example of the Government and the public sector acting as a good customer, paying invoices rapidly, and helping drive economic growth through small businesses in every postcode.

Piers Neill, Head of Policy at The Business Services Association said: 

We warmly welcome this recognition of the role that service and infrastructure providers play in supporting many of the Government's goals including growth, jobs, and value for communities in every postcode. Embedding this at the heart of central government procurement practices is a crucial step and we look forward to working with Cabinet Office colleagues as thiswork progresses. 

Craig Wilson, UK CEO, Sopra Steria said:

"At the heart of every successful organisation and thriving economy are people. When people have the opportunity to work, learn and grow, the benefits extend far beyond the workplace to families, communities and society as a whole. That's why we welcome the Government's focus on creating employment opportunities through public procurement. Good jobs, skills development and pathways into work are fundamental to long-term prosperity and inclusive growth. As a major employer and long-standing partner to government, Sopra Steria is proud to support this ambition and help create opportunities that enable more people and communities to thrive."

Anthony Kirby, Serco Group Chief Executive said:

We are proud to support the UK Government in delivering this initiative and to continue backing Britain.

We employ over 30,000 people from Cornwall to Shetland, supporting essential services across every corner of our four nations. Among our team, over 4,000 are under 24, we're recognised as the best place to work for veterans, and are the most admired employer in our sector. But we are going further, investing to create opportunities across the country with targeted employment programmes, support for NEETs, care leavers, veterans and people with lived experience of homelessness, to have fulfilling careers at Serco.

We stand ready to support this ambition: delivering high-quality public services, creating skilled jobs across the UK, and helping more people access the opportunities they need to build sustainable careers.

Stuart Togwell, CEO at Kier Group, said: 

This new model is a welcome step to ensuring public procurement supports lasting benefits for people, communities and businesses across the UK.

At Kier, we have long believed that what we do is about more than just the infrastructure we create. Via our regional presence, we create jobs, develop skills, strengthen local supply chains and open opportunities for those who face barriers to employment.

This new approach recognises the powerful role procurement can play in supporting British businesses to generate positive social impact alongside economic growth. It provides a clear framework for industry and Government to work together to deliver growth and opportunity, while building the skilled workforce the country needs.

Andy Milner, Chief Executive Officer, Amey said:

"We welcome the Government's focus on ensuring public procurement delivers tangible economic and community benefits. Public investment should do more than deliver services. It should create local jobs, develop skills and open opportunities for those who need them most.

At Amey, we work with local authorities, customers, supply chain partners and community organisations to create pathways into employment for young people, care leavers, veterans and underrepresented groups. In 2025, we created £248m worth of social value, up from £211m the previous year, and will continue to invest in the skills, supply chain partnerships and community programmes that help local economies grow.

By aligning investment with local needs and clear social outcomes, we can maximise the impact of public spending and ensure communities across the UK benefit from economic growth and opportunity."

Andy Canniford, Chief Officer for Impact and Growth at Catch22 said:

Catch22 very much welcomes the government's commitment to ensure that public procurement reaches further through social value - delivering local growth, addressing youth unemployment, and supporting local communities. 

As both a provider of employability and skills programmes through social value funding and as public sector contractor, Catch22 knows the crucial role social value requirements play in creating local opportunities. We are also encouraged to see the government's recognition of civil society expertise, innovation, and local partnership by a fairer process for the voluntary sector in public procurement processes.

We are looking forward to working with the government on developing clear guidance that will maximise the impact of the new measures and deliver for skills, jobs and fair pay for those who need it most, including NEET young people, care leavers, and communities.

Matthew Gordon OBE, Chief Executive at Spectra (Delivery Partner for Care Leaver Covenant) said: 

"Today's announcement is a welcome sign that government is taking both social value, and the places it can reach, more seriously. If companies are asked to deliver real, measurable social value wherever they win public work, then social value stops being a box to tick and becomes what it should always have been: an enabler of opportunity, and of good growth in every postcode."