UK to increase funding for state lenders by £20.4bn in Budget push

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UK to increase state lender funding

Highlights

Chancellor John Healey will increase funding for the National Wealth Fund by £15.4 billion and the British Business Bank by £5 billion over five years.
The National Wealth Fund will receive £2 billion specifically for the Energy Wealth Fund, with new borrowing beginning in 2028-29 and ramping up by 2031-32.
The British Business Bank’s capacity will rise from £25.6 billion to £30.6 billion to support scale-up finance amid a broader Budget push including AI investment and cost-of-living support.

Budget funding plan and timeline

As reported by Financial Times, Chancellor John Healey is to provide the National Wealth Fund and British Business Bank with additional capital over roughly half a decade in next week’s Budget. The Treasury says the package uses flexibility in the government’s borrowing framework because the assets created by the public financial institutions’ investments offset the related liabilities, leaving public sector net financial liabilities unchanged.

The National Wealth Fund is to receive an extra £15.4 billion, including £2 billion for an Energy Wealth Fund focused on renewables. The Treasury says that would allow the fund to continue lending at its current pace until 2030-31, with borrowing for the support expected to begin in 2028-29 and to be raised gradually by about 2031-32.

The British Business Bank is to be topped up by £5 billion through additional debt issuance, although the exact timing may vary depending on investment decisions. Its capacity currently stands at £25.6 billion and the increase would lift that to £30.6 billion.

Economic and policy implications for the UK

The government is presenting the move as a way to back businesses and infrastructure while public finances remain under pressure from higher interest costs and the impact of the Iran war on borrowing costs. The Treasury says the funding is aimed at industries and places that can generate jobs and longer-term growth across the country.

The National Wealth Fund, formerly the UK Infrastructure Bank, is the government’s main public investor in infrastructure, including green energy and supply chains, and is also financing the construction of the Sizewell C nuclear power station. The British Business Bank is being used to expand support for scale-up finance for high-growth companies.

Further Budget measures are also starting to emerge, including plans to allocate hundreds of millions of pounds to strengthen the UK’s AI capabilities and create a new AI biosecurity lab. Healey is also expected to focus additional spending on cost-of-living support, while weighing tax, wage and energy cost measures that could affect businesses, banks, the gambling industry and employers facing rising labour costs.

In our earlier coverage of Chancellor John Healey’s pre-Budget stance, we outlined his commitment to sticking with a deficit-reduction strategy while still trying to support growth. We also noted the UK’s modest 0.1% GDP expansion in August and the mounting political pressure around potential tax and spending choices ahead of the October Budget.

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