Government Unveils Major Funding Boost for SMEs

Fashion brands, manufacturers and textile businesses could benefit from billions of pounds in additional finance following the government’s announcement of the biggest overhaul of small business lending in recent years.

Announced by Chancellor Rachel Reeves, on 13th July 2026, ahead of her Mansion House speech, the package is designed to improve access to finance for small and medium-sized enterprises (SMEs), helping businesses invest, innovate and create jobs.

For many fashion businesses, particularly independent brands, manufacturers, wholesalers and suppliers, access to affordable finance remains one of the biggest barriers to growth. Rising production costs, investment in new technology, expanding into export markets and recruiting skilled staff all require capital, yet securing traditional bank lending has often proved difficult.

At the centre of the reforms is a major expansion of the British Business Bank’s Growth Guarantee Scheme (GGS), which provides lenders with a 70% government guarantee on loans of up to £2 million.

Since launching in 2022, the scheme has supported more than £3.7 billion in finance for UK SMEs, with the majority of lending going to businesses outside London and the South East.

Under the new plans:

• Government-backed lending through the scheme will increase from £1.35 billion to £3.35 billion annually by 2028/29.
• Around 12,000 additional SMEs each year are expected to benefit, increasing the total number of supported businesses to around 20,000 annually.
• Loan terms will extend from six to ten years for eligible borrowing up to £1.1 million.
• Businesses with annual turnover of up to £54 million will become eligible, up from the current £45 million threshold.

The government estimates every £1 invested in the scheme supports approximately £10 of lending through participating banks.

The announcement also includes £500 million through the British Business Bank’s ENABLE Guarantee programme to improve lending for innovative businesses with valuable intellectual property.

While traditionally associated with technology companies, the funding could also benefit fashion businesses developing proprietary materials, sustainable manufacturing processes, digital product development, wearable technology and circular business models – areas where intellectual property often represents significant value but can be difficult to leverage when seeking finance.

For fashion businesses investing in digital transformation, AI-powered design tools or next-generation textile innovation, the additional support signals growing recognition of innovation across the UK’s creative industries.

The government has also confirmed a new finance guarantee scheme, delivered jointly by UK Export Finance and the British Business Bank, launching in spring 2027.

The initiative aims to make it easier for SMEs to secure finance to grow international sales – a welcome development for UK fashion brands looking to expand into overseas markets at a time when exporting continues to present both opportunities and challenges.

Alongside mainstream lending, the government is strengthening support for Community Development Finance Institutions (CDFIs), which specialise in lending to businesses that may struggle to access traditional finance.

The ambition is to unlock an additional £1 billion of SME lending over the next five years, helping more entrepreneurs and smaller businesses obtain the funding needed to grow.

The announcement has been welcomed by major banks and business organisations, including the Federation of Small Businesses and the British Chambers of Commerce, both of which have long argued that improving access to finance is essential to driving business investment.

For the fashion industry, the reforms arrive at a time when many businesses are balancing rising operating costs with the need to invest in sustainability, digital technologies, UK manufacturing capabilities and workforce development.

While access to finance alone won’t solve every challenge facing the sector, expanding government-backed lending provides fashion SMEs with more opportunities to secure the investment needed to scale their businesses, strengthen supply chains and compete in an increasingly demanding global marketplace.

As the new measures are rolled out over the coming months, fashion businesses planning investment or expansion may wish to review their funding options and speak with participating lenders to determine whether they could benefit from the enhanced Growth Guarantee Scheme or other government-backed finance programmes.

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