UK government announces new support for small businesses

Chancellor of the Exchequer, Rachel Reeves, has announced that the UK government will “unlock billions in finance” for small businesses, marking one of the most significant reforms to support small and medium-sized enterprises (SMEs) in years.

In a statement, HM Treasury said that 12,000 additional SMEs per year will receive support accessing finance as it expands its Growth Guarantee Scheme, as the government allocates 500 million pounds in funding to innovative SMEs and scale-ups.

The changes, it states, will help businesses “grow, invest and create jobs across the country,” and come ahead of the Chancellor’s Mansion House speech on Tuesday, July 14, where she is expected to share the government’s commitment to making “the UK the best place to start and grow a business”.

The gap between the SME demand for finance and the amount available is estimated to be between 1.6 billion and 4.1 billion pounds per year, explains the government, and improving access “is key to unlocking greater business investment, growth and productivity across the UK”.

The focal point of the support is the expansion of the British Business Bank’s (BBB) successful Growth Guarantee Scheme (GGS), which provides a 70 percent government guarantee on commercial loans to SMEs of up to 2 million pounds. Since its launch in 2022, the scheme has delivered more than 3.7 billion pounds of financing to UK SMEs, with 2.5 billion pounds of this reaching businesses outside of London and the Southeast.

Reeves’ proposals will scale the lending scheme to facilitate an additional 2 billion pounds of SME lending per year by 2028/29, increase the maximum term length of a loan from six to 10 years for loans of up to 1.1 million pounds, and increase the maximum size of businesses that are eligible for a loan under the scheme from 45 million pounds in annual turnover to 54 million pounds.

The BBB estimates these changes will support an additional 12,000 businesses per year by 2028/29, a 150 percent increase on the 8,000 currently being supported, bringing the total to 20,000.

SMEs to receive additional finance support from the government

Reeves said in a statement: “Our plan for the economy has put Britain on a stronger footing, restoring stability, getting investment flowing, and delivering reform. 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.”

The new reforms for SMEs will also include a new portfolio guarantee scheme delivered jointly by UK Export Finance and the British Business Bank, designed to increase the availability of finance for SMEs.

Launching in spring next year, the scheme will help firms access lending to support export activity and expand into international markets, strengthening the UK’s exporting base and supporting long-term economic growth.

Martin McTague, national chair of the Federation of Small Businesses (FSB), added: “Access to finance is a fundamental need for small businesses looking to grow, so we are pleased to see our calls to amp up the British Business Bank’s Growth Guarantee scheme have been heard.

“Expanding resources and extending payment terms will help small businesses build wealth in every part of the country. Small firms need as many finance options available to them as possible right now.”