Chancellor Rachel Reeves has announced new measures to improve SMEs’ access to finance, one of the few initiatives she has delivered for small firms during her two-year tenure at the Treasury.
While Ms Reeves has focused her attention on infrastructure and institutional funds, SMEs feel they have been largely overlooked or forced to carry the weight of her tax and regulatory burdens.
The latest support package involves a £2 billion annual expansion of the British Business Bank’s (BBB) Growth Guarantee Scheme (GGS) which provides a 70% government guarantee on commercial loans to SMEs of up to £2 million.
It aims to reduce credit risk, while the threshold for eligible firms will rise from £45m in annual turnover to £54m.
Ms Reeves described it as the most significant reform to small business finance in years, and business leaders said it should help SMEs scale and develop more export business.
It comes ahead of the Mansion House speech on Tuesday that may be her last set-piece address at the Treasury ahead of Andy Burnham’s arrival at Number Ten next week.
The BBB estimates these changes will support an additional 12,000 businesses per year by 2028/29, a 150% increase on the 8,000 currently being supported, bringing the total to 20,000.
Ms Reeves, said: “We know that small businesses are the backbone of this economy and growth in all our regions, and for too long they have heard ‘no’ when trying to raise the funds they need to grow and create jobs across the UK.
“When they succeed, we all succeed, and today’s major reforms are the most significant step in years to unleash their potential.”
Business Secretary Peter Kyle said: “Today we’re putting our weight behind Britain’s entrepreneurs and innovators, unlocking billions in additional lending to help thousands more small businesses start, scale and succeed because access to finance should never be the barrier between a good idea becoming a great British business.”
Paul Thwaite, CEO NatWest Group, said: “As the UK’s biggest bank for business, this will allow us to deepen our support for firms, lending in the region of £1bn through the Government Guarantee Scheme over the next three years.”
Louise Hellem, chief economist at the CBI, said: “Expanding support to more businesses through the Growth Guarantee Scheme, lengthening loan terms and backing IP-rich, innovative companies can help unlock investment in every part of the country.
“For many SMEs, the right finance at the right time can be the difference between delaying plans and pressing ahead with new equipment, new markets or new hires.
“The government deserves credit for listening to business and putting forward a package that recognises the practical finance challenges firms face.
“The priority now is delivery and making sure the support is simple to access, well understood by businesses and effective in crowding in private capital.
“If implemented well, these reforms can help more SMEs scale, export and adopt new technologies here in the UK — supporting productivity, stronger local economies and long-term growth.”
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