Banks told to lend — but will small firms see a penny?

Britain’s struggling small businesses were promised a banking revolution today as ministers unveiled a major Financial Services Bill designed to “boost competition” and modernise lending — but millions of owners are asking the same blunt question: will any of this actually help us? After years of being rejected by high street banks, hammered by borrowing costs and forced towards eye-watering fintech loans just to survive, many micro firms fear this is another glossy City reform package that sounds impressive in Westminster but arrives far too late for businesses already fighting to keep the lights on.

Photo by Max Whitehead on Unsplash

The new Enhancing Financial Services Bill aims to shake up the UK’s banking system but we need it to help small and micro businesses. They want to know: “What’s in it for us?”

The Government’s new Enhancing Financial Services Bill got a slot in the King’s Speech, heralding a sweeping shake‑up of the UK’s banking and finance rules. Ministers say the plan will “boost competition, cut costs and modernise the financial system”. What does that mean for the millions of small firms battling cashflow crises, late payments and sky‑high borrowing costs?

THE BILL IS TRYING TO

Make the financial sector more competitive

The Government wants more lenders, more products and more innovation and not just the same big banks calling the shots.

Encourage new types of finance

• fintech lenders

• digital banks

• alternative finance

• new payment systems

All these are meant to give small firms more choice.

Strengthen the UK as a global finance hub

Ministers want London to stay competitive with New York, Singapore and the EU, which they say will “benefit the wider economy”.

There could be good news for small and micro businesses. In theory more lenders equal more choice

If the Bill works, small firms could see:

• more competition for loans

• better rates

• faster decisions

• more flexible products

Too many micro‑businesses get a flat “NO” from the big banks and most products aren’t designed with micro businesses in mind. Nor do most small and micro businesses have access to the help they need to know how to make a successful pitch to banks for funding. All that needs to change.

Fintech could speed up cashflow

New rules could help:

• instant payments

• better financing tools

• smarter credit scoring

• easier access to working‑capital loans

For firms living invoice‑to‑invoice, this is could boost business confidence and investment and have huge growth potential.

Better protection from dodgy financial practices

The Bill aims to tighten oversight of financial products meaning fewer nasty surprises for small firms. However, product designers are usually ahead of the oversight and unintended consequences only surface later.

Small businesses have heard big promises before and many are sceptical.

There’s no guarantee banks will lend more

The Bill can encourage competition, but it can’t force banks to say yes. They are businesses and the business will come first.

This doesn’t fix late payments or unfair contractual payment terms

Even with better finance options, small firms still need big customers to pay fairly and on time. This Bill doesn’t touch that. The Small Business Protections (Late Payments) Bill deals with late payments so that needs to go through to legislation too.

Benefits may take YEARS to reach micro‑firms

Regulatory changes move slowly. Small businesses need help now, not in 2028.

Fintech isn’t always cheaper

Some alternative lenders charge eye‑watering rates. More choice doesn’t always mean better value or a better outcome for the small and micro business customers.

The Enhancing Financial Services Bill could be a big win for small and micro businesses, if it delivers:

• more lenders

• more competition

• faster decisions

• fairer products

• better protection

However, it’s long‑term reform, not a quick fix. Until it becomes law small firms still face late payments, high energy bills, rising taxes, wages and business rates, and shrinking margins. This Bill might help businesses borrow but it won’t solve the problems that mean they need to borrow in the first place.

Enhancing Financial Services Bill 33

● The financial services sector plays a vital role in the UK’s economy – it is one of the most successful export sectors, a key enabler of growth in other sectors, and a provider of payments, credit, insurance and investment services to households and businesses all across the UK, including through credit unions supporting communities nationwide.

● The Enhancing Financial Services Bill will deliver key parts of the Leeds Reforms set out by the Chancellor in 2025. It will modernise how the sector is regulated, enable it to grow and to lend more to businesses, and make consumer protections fit for the digital age – all while maintaining high standards of regulation and oversight, supporting the UK’s position as a leading global financial centre. What does the Bill do?

● The financial services sector is one of the UK’s greatest economic success stories – playing a vital role in the economy, responsible for around 20 per cent of UK exports and underpinning the provision of payments, credit, insurance and investment services to households and businesses. The UK is the world’s largest net exporter of financial services and a leading global financial centre, serving people and businesses across the world. It supports jobs across the country in places like Leeds, Manchester, Edinburgh and London.

● The UK financial services sector has continually been at the forefront of innovation. However global competition has intensified and the UK needs to keep up the pace. This has meant that in recent years, the sector has experienced slower growth and productivity gains, and higher costs. We want Britain to be more competitive globally, and to harness the UK’s global leadership in financial services, so it is better able to support UK businesses and consumers.

● The Bill will: ○ Modernise consumer protections and redress arrangements to reflect today’s markets and maintain confidence. It will ensure consumers are appropriately protected when something goes wrong, making sure protections are fit for the digital age. Reforms to the Financial Ombudsman Service will increase consistency and clarity of decision-making, helping people resolve disputes more quickly and with greater certainty. ○ Consolidate the regulatory framework to enable stronger coordination and clearer responsibilities, reduce fragmentation of 34 the regulators and support innovation. By streamlining the regulatory architecture and consolidating the Payment Systems Regulator within the Financial Conduct Authority (FCA), firms will deal with fewer overlapping regulators, providing clearer accountability and faster decision-making. ○ Ensure that the administrative burden on firms is proportionate without compromising on core consumer, prudential and market protections. This includes reducing the overall burden of the Senior Managers and Certification Regime - the framework that holds senior leaders in financial firms personally accountable - by 50 per cent with a focus on accountability of the most senior figures in financial services; freeing up firms to focus on serving customers and invest in growth, rather than dealing with overly burdensome compliance processes. ○ Enable credit unions to expand by improving the rules on who can become a member. This will allow credit unions to serve more people and communities, widening access to affordable finance and supporting the Government’s aim to double the size of the mutual and co-operative sector. ○ Support lending and investment including by updating the statutory framework underpinning the ring-fencing regime, which requires major banks to separate their UK retail banking services from investment banking activities. The reforms will unlock more finance for UK businesses. Improved competition in Small and Medium-Sized enterprises’ (SME) lending will help small businesses access finance. Territorial extent and application ● The majority of measures will extend and apply to the whole of the UK. Key facts

● The financial services sector accounts for around 8 per cent of UK output and employs more than 1.1 million people across the country. It is one of the UK’s most globally competitive sectors, with London ranked second only to New York in the 2025 Global Financial Centres Index.

● The sector also makes a very significant tax contribution. According to TheCityUK figures, in 2023 the sector contributed £79.3 billion, or around 9 per cent of total UK tax receipts.

● The UK is the largest global net exporter of financial services totalling £102.2 billion in 2025, representing half of the UK’s services export surplus. ONS figures 35 show that excluding the US, UK financial services exports in 2025 were greater than the rest of the G7 combined.

● Despite its strengths, the sector has not grown in real terms since 2010, in contrast to several international financial centres that have recovered more strongly since the Global Financial Crisis. Slower growth can harm productivity, innovation and jobs, and risks losing jobs and investment overseas.

● The financial services regulatory framework has grown significantly over time. Responses to the Government’s ‘Financial Services Growth and Competitiveness Strategy: Call for Evidence’ indicated that the complexity of the UK regulatory environment is detracting from the UK’s overall attractiveness, with many respondents indicating that it was more complex and burdensome to be regulated as a financial services firm in the UK than in other countries.

● Credit unions are financial co-operatives currently serving over 1.5 million people across Great Britain, according to Bank of England data. These reforms will make it easier for the 220 credit unions in Great Britain to attract more members, allowing millions more people to potentially benefit from the expansion of affordable, community-based financial services. This supports the Government’s ambition to double the size of the mutual sector and, as credit unions are deeply embedded in their communities, promote growth across all regions of Great Britain.

● The Chief Executive Officer of Santander UK, Mike Reigner, said “We welcome the announcement of the Leeds Reforms… which set out a positive vision for UK financial services. The changes outlined within the package are important steps to modernising the UK’s regulatory architecture and will enable banks like ours to support our customers better and drive growth within the wider economy.”