Budget 2026: what the Autumn Budget means for public sector suppliers

This year's Autumn Budget creates new routes into government for UK AI firms, fully funds the extra £15bn for the Defence Investment Plan, and doubles the minimum social value weighting on central government contracts of £5m or more from January 2027. The Chancellor also wants public procurement to back British firms, and is developing a new definition of a UK supplier.

Budget 2026 at a glance

Where is the new money for UK AI suppliers?

Public sector AI buying was already growing fast, and the Budget gives UK firms new ways to sell into it. Stotles data shows 341 UK public sector notices with AI in the title between January and September 2026, up from 203 in the same months of 2025 and 82 in 2023. The new funding includes:

• Additional £60m for Sovereign AI's R&D Procurement Scheme (health and care, AI security)
• £15m AI Challenge Prize, starting with the NHS, with a top award of up to £2.5m
• £35m to set up GovAI, which will help departments buy AI and work with startups
• £50m Civil Service AI transformation fund across 2027-28 and 2028-29

NHS trusts and other health bodies published 58 of the 341 AI notices, about one in six, and the first AI Challenge Prize will focus on the NHS.

Recent notices include the Home Office's early engagement for an AI as a Service delivery partner through the Government Commercial Agency's Artificial Intelligence dynamic purchasing system (RM6200), the Ministry of Defence's TF RAID requirement for AI-supported operational planning (DDAITF/013), and Berkshire Healthcare NHS Foundation Trust's £3.2m ambient voice technology procurement.

Is the Defence Investment Plan now fully funded?

Yes, the Budget fully funds the extra £15bn the government committed to the plan in June, including £4.7bn that had no funding until now. The money covers 2026-27 to 2029-30, and the £4.7bn comes from cutting departmental capital budgets by 1% from 2027-28 to 2029-30, which raises £3bn, plus £1.7bn of unallocated contingency in the Treasury's capital reserve. If you work on other departments' capital programmes, keep an eye on project timing as those budgets tighten.

Defence spending will reach 2.7% of GDP in 2027-28, and next year's Spending Review will set out how the UK will meet 3% by 2030 and 3.5% by 2035. The National Wealth Fund and British Business Bank will put up to £5bn into defence, dual-use and national security sectors over the next four years. The UK will also begin treaty negotiations with Finland, Poland and the Netherlands on the Multilateral Defence Mechanism to speed up defence investment and joint procurement across NATO allies.

MoD award volumes have fallen, so suppliers will be watching how quickly the extra money turns into contracts. Stotles data shows the MoD and its delivery bodies awarded 734 contracts between January and September 2026, 37% fewer than in the same months of 2025. Technology made up 29% of MoD contracts and 12% of the money between July 2025 and September 2026, and £2.7bn of MoD technology contracts expire by October 2028.

Related reading

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Where is the new cyber security money going?

The Budget invests £154m to strengthen cyber defences and £40m to set up a National Agentic Security Unit. HM Treasury's AI announcement on 24 October also set out a £70m National Exposure and Real-Time Vulnerability Centre and a £60m National Cyber Shield, which includes a £25m challenge fund for UK AI and cyber security innovators. The AI Security Institute gets a further £120m.

Demand from frontline buyers is already rising. Councils, NHS bodies, schools, colleges and universities published 148 cyber security notices between January and September 2026, up from 132 a year earlier, out of 374 across the public sector (Stotles platform data).

What changes for public procurement after Budget 2026?

From January 2027, central government will score bids worth £1m or more on the jobs and skills they create, such as fair pay, working conditions and training, and the minimum weighting doubles from 10% to 20% for contracts of £5m or more.

PPN 026, the Cabinet Office's new Social Value Model, covers procurements of £1m or more (including VAT) by central government departments, their executive agencies and non-departmental public bodies that start on or after 1 January 2027. Contracts of £5m or more should also set at least one social value KPI.

The Chancellor said in his Budget speech that he is developing a new definition of a UK supplier to identify companies creating genuine wealth, investment and jobs in Britain. The new Data Centre Covenant sets the tests strategic data centres are expected to meet, including their contribution to communities and the UK's economic interests.

How many contracts will the new social value rules touch? Stotles data shows central government departments, agencies and non-departmental public bodies published 771 tenders with a stated value of £1m or more between October 2025 and September 2026, and 341 of those were worth £5m or more. A third of central government tenders in that period had no stated value, so the real number is higher.

What should suppliers do now?

1. Watch for challenge competitions. Track Sovereign AI's R&D Procurement Scheme and the AI Challenge Prize.
2. Get on the frameworks defence buyers use. G-Cloud 14 and TePAS 2 carried the most MoD technology call-offs in Stotles data.
3. Plan for local cyber demand. Make sure you're on the routes councils and NHS bodies use, such as Cyber Security Services 3.
4. Rewrite your social value offer for PPN 026. Build it around good jobs and skills, with a KPI you can report on.
5. Know your UK footprint. Count your UK staff, sites and subcontractors before the UK supplier definition is published.

We can track these signals for you. Add "artificial intelligence", "cyber security" or "social value" to your Signal Settings to see new pre-tender notices as buyers publish them, or ask the Stotles MCP from your own AI assistant: "Show me central government pre-tender notices for AI published since the Budget."

Budget 2026 for suppliers: quick answers

When do the new social value rules start?

PPN 026 applies to central government procurements of £1m or more (including VAT) that start on or after 1 January 2027. Social value must carry a minimum 10% weighting on contracts of £1m to £5m and 20% on contracts of £5m or more. Other public bodies can choose to adopt the approach.

What is the new "UK supplier" definition?

The Chancellor said in his Budget speech that he is developing a new definition of a UK supplier to identify companies creating genuine wealth, investment, and jobs in Britain. We haven't found a publication date or any detail on how buyers will use it in the Budget coverage so far.

How is the Defence Investment Plan funded?

The government committed an extra £15bn to the plan in June, covering 2026-27 to 2029-30. £10.3bn comes from reprioritised spending, and the Budget covers the remaining £4.7bn with a 1% cut to departmental capital budgets from 2027-28 (£3bn) and £1.7bn from the Treasury's capital reserve.

What is the AI Challenge Prize?

It's a new prize, backed by £15m and run by the Department for Culture, Media and Sport, for UK-based innovators and businesses developing AI for major frontline public service challenges. The first competition focuses on the NHS, with a top award of up to £2.5m.

About the data

Stotles platform data, UK notices only. AI notices are those with "AI", "artificial intelligence", "machine learning", "generative AI", "large language model" or "agentic" in the title, counted once per procurement, January to September each year; the NHS and health share uses Stotles buyer categories. Cyber notices use "cyber", "penetration test", "security operations centre", "ransomware" and related terms in the title. Central government means ministerial and non-ministerial departments, agencies and non-departmental public bodies; tenders are counted once per procurement, published 1 October 2025 to 30 September 2026, using the value stated on the notice. Defence figures cover award notices from the Ministry of Defence and its delivery bodies, counted once per procurement, with framework agreements excluded from the technology share.