Chancellor announces billions for SMEs, including £500m targeting IP-rich, tangible asset poor innovative firms

Image: GOV UK

Rachel Reeves, Chancellor of the Exchequer, has announced a support package for the UK’s SMEs worth billions of pounds - including £500m of ENABLE Guarantee capacity ringfenced over the next 12 months to support bank lending to Intellectual Property-rich smaller businesses, particularly scale ups.

The Government says the changes will help businesses grow, invest and create jobs across the country, and come ahead of the Chancellor’s Mansion House speech on Tuesday.

The measures include:

• 12,000 additional SMEs per year to receive support accessing finance as Growth Guarantee Scheme expanded significantly

• £500m BBB ENABLE funding ringfenced over next year to back lending innovative SMEs and scale ups

• New support for community lenders, finance for innovation, and exporters

The gap between the SME demand for finance and the amount available is estimated to be between £1.6bn to £4.1bn a year. The Government argues that improving this access is key to unlocking greater business investment, growth and productivity across the UK.

At the heart of the plans just published is an expansion of the British Business Bank’s (BBB) highly successful Growth Guarantee Scheme (GGS) which provides a 70% government guarantee on commercial loans to SMEs of up to £2m, cutting credit risk for lenders.

Since its launch in 2022, the scheme has delivered over £3.7bn of financing to UK SMEs with £2.5bn of this reaching businesses outside of London and the Southeast.

Every £1 spent on the scheme is estimated to support around £10 of lending by banks.

Expansion of the scheme has been one of the key priorities for SME trade bodies and the financial services sector ahead of the Mansion House speech.

• The scheme will scale up to facilitate an additional £2bn of SME lending per year by 2028/29. This will bring the total SME lending supported through the scheme to £3.35bn per year, more than double the current £1.35bn.

• The maximum term length of a loan from will increase from six to 10 years for loans of up to £1.1m.

• The maximum size of businesses that are eligible for a loan under the scheme will increasing from £45m in annual turnover to £54m.

• 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.

Rachel Reeves, said:

“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.”

Business Secretary Peter Kyle added:

“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.”

In addition to the expansion of the GGS, the BBB has also ringfenced £500m of the financial capacity within its ENABLE Guarantee programme to unlock lending to SMEs and scaling firms that are rich with innovative intellectual property (IP) for the next 12 months.

In its statement on the new measures, the BBB said:

"Many innovative businesses have significant value in intellectual property (IP), including intangible assets such as patents, trademarks, software, designs, copyright or know-how, but lack the physical collateral that lenders traditionally rely on. This can make it more difficult, or prohibitively expensive, for them to access debt finance."

"Recognising this, the British Business Bank is making up to £500m of existing ENABLE Guarantee capacity available over an initial 12-month period to support lending to IP-rich smaller businesses. This is expected to help increase the availability of finance for IP-rich businesses, enable more competitive pricing and develop stronger lender capability to assess IP-driven business models."

The Government announcement said that this move

“will strengthen the UK’s innovation ecosystem and help boost the UK’s AI sovereignty, a key tenet to achieve growth set out by the Chancellor in her Mais lecture earlier this year.”

Supporting the wider SME finance ecosystem

Alongside today’s announcements, the government is also pledging other key steps to support the wider SME finance ecosystem. From the point of view of IP-rich SMEs, one of the most significant of these steps will be a package of reforms aimed at unlocking financing for scale-up firms, including through a ‘New Growth Allowance’. Additionally, the government plans to change the law so building societies can lend to SMEs.

Paul Thwaite, CEO NatWest Group, commented:

“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.”

Matt Hammerstein, Chief Executive of Barclays’ UK Corporate Bank, said:

“We welcome the Chancellor’s announcement. We see the vital role access to finance plays in helping businesses grow in interactions with clients every day. Barclays’ Business Prosperity Index consistently shows that UK firms are ambitious to invest and expand, notwithstanding the uncertainty in which they operate. Through our £22 billion Business Prosperity Fund, we are helping businesses access the capital and expert support required to turn that ambition into growth. We are excited to combine that with today’s measures to unlock even more investment, boost productivity, further and support long-term economic growth across the UK.”