Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of the proposed Growth Allowance within the ring-fencing reforms on the availability of finance for small and medium-sized enterprises across the UK.

This Government published the outcome of its review of the ring-fencing regime on 18 May, fulfilling the Chancellor’s commitment to uphold the regime while taking forward meaningful reform. This included plans to introduce a New Growth Allowance to enable the five ring-fenced banks to provide more productive funding to UK businesses and the real economy

Ring-fenced banks can already provide loans to most small and medium-sized enterprises (SMEs) under existing regulations but are prevented from offering more sophisticated financial products to UK businesses from their ring-fenced entity. The New Growth Allowance will be targeted towards ensuring that fast growing businesses can access the products and services they need from the ring-fenced body where the cost of financing is cheaper.

Banks will also be permitted to service and lend to a broader range of financial counterparties within the allowance, including to providers of scale-up capital. The reforms will also allow RFBs to fully participate in funding schemes guaranteed by UK Public Financial Institutions such as the British Business Bank, which will further unlock financing for schemes targeted towards SMEs.

The government will publish a consultation on the operation, level, and scope of the New Growth Allowance over the summer. A Statutory Instrument to deliver the changes will be laid once the Financial Services and Markets Bill has been enacted and as soon as Parliamentary time allows.