Reeves opens ‘£2bn lifeline’ for small firms

Loan guarantee expansion could help 12,000 more businesses a year after warnings that firms are being starved of finance

Rachel Reeves is to unlock an extra £2bn a year in government-backed lending for small businesses.

The UK Chancellor said today that she will be expanding the Growth Guarantee Scheme, increasing the amount supported annually from £1.35bn to £3.35bn by 2028-29.

The Treasury claims the move will help another 12,000 firms a year, taking the total number supported from 8,000 to 20,000.

The announcement comes ahead of Reeves’ Mansion House speech, with the Treasury estimating that small firms face an annual funding shortfall of between £1.6bn and £4.1bn.

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.”

The scheme gives banks a 70 per cent government guarantee on eligible business loans of up to £2m, reducing the risk for lenders.

It has provided more than £3.7bn to small and medium-sized firms since 2022, including £2.5bn outside London and the South East.

The maximum repayment period for loans of up to £1.1m will rise from six years to 10, and the turnover limit for eligible firms will increase from £45m to £54m.

A further £500m will be used to support innovative firms and scale-ups whose value lies in intellectual property instead of physical assets.

The funding will target sectors including life sciences, the creative industries and artificial intelligence.

Ministers also want to unlock £1bn of lending through community finance providers over the next five years.

A separate export guarantee scheme will launch next spring to help smaller firms fund overseas expansion.

Banks and business groups including NatWest, Lloyds, Barclays, HSBC, the Federation of Small Businesses and the British Chambers of Commerce welcomed the measures.

Paul Thwaite, CEO NatWest Group, said: “We welcome the changes announced today. 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.”

Last week, Reeves warned Andy Burnham he needs to have a proper plan for government when he enters Downing Street in just over a week’s time.

During an appearance on the BBC’s Laura Kuenssberg programme, she said: “It is important that when Andy walks through that door, that he has a worked-through plan, because governing is hard in Britain, and lots of lots of challenges and shocks will come his way.”

READ MORE: UK government must “think again” about small business plan. Business and Trade Committee says government response fails to address tax, energy, procurement and crime pressures facing firms. 

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_{Main image: Rachel Reeves with Sir Keir Starmer after her appointment as Chancellor of the Exchequer on 5 July 2024. Picture: Simon Dawson/No 10 Downing Street, OGL 3.0}