UK Finance, the banking industry body representing lenders including Barclays, Lloyds and NatWest, has written to Chancellor Rachel Reeves calling for significant changes to the government’s small business lending scheme.
The letter urges Reeves to approve a fivefold increase in the maximum loan available under the Growth Guarantee Scheme, known as the GGS.
The scheme was first launched in 2024 and is administered through the British Business Bank, with the aim of improving access to finance for small and medium-sized enterprises.
Under current rules, firms with a turnover of up to £45m can receive loans of up to £2m, backed by a 70 per cent government guarantee designed to give lenders greater protection.
The lobbying push comes ahead of Reeves’ July Mansion House speech, where pressure is mounting on the Chancellor to strengthen efforts to drive economic growth.
UK Finance chief executive Davis Postings wrote in the letter that expanding the GGS “could materially improve access to finance for UK businesses and support investment, productivity and regional growth.”
Postings argued the scheme should be expanded to support around £5bn in annual lending, with maximum loan terms extended to ten years alongside an increase in the maximum loan size.
“Evidence from our members suggests demand significantly exceeds existing allocation, with capacity — rather than credit appetite or operational capability — being the primary constraint,” he wrote.
He added: “Some firms report they could more than double lending under the scheme if greater allocation were available.”
Postings also pointed to analysis from the British Business Bank suggesting amendments to the GGS “could generate over £10bn in additional SME turnover.”
The UK Finance chief was keen to stress that the proposal would not place a large burden on public finances, noting the scheme operates as a risk-sharing model intended to unlock private sector lending.
“Importantly, this proposal does not entail a large new spending commitment,” Postings said, adding that “the GGS operates as a risk-sharing model designed to mobilise significantly greater volumes of private sector lending.”
Earlier this month, Reeves announced a major overhaul of the ring-fencing regime in a move intended to free up capital for investment into the UK economy.
That announcement followed a period of sustained lobbying from the banking sector, with senior banking figures having previously branded the existing ring-fencing arrangements “redundant.”